TNAG-1053-FCO40-1303-China-and-Hong-Kong-Working-Group-1981 — Page 30

ANNEX A

ECGD's COVER FOR LEASING

1 ECGD can provide credit insurance cover and financial support

for both Financial and Operational Leases entered into by UK lessors

with lessees abroad, including China and Hong Kong.

2

FINANCIAL LEASES

A

i

COVER

Financial leases are basically a substitute for sale

contracts. The lessor undertakes to pay rentals to the lessor

for a minimum period and the aggregate value of those rentals

is sufficient for the lessor to recover his costs (eg purchase

overheads,

After

F

price of goods and associated services; cost of financing

the transaction) net of any associated tax benefits.

this minimum period the lessee may continue to lease

indefinitely for a nominal rent or buy the goods for a nominal

sum.

ii Cover for payment of sums due from the lessee under a

financial lease is given by way of a Specific Shipment Hiring

Policy which covers the normal causes of loss that apply to

sales of goods contracts and is effective from the date of

exportation of the goods. Except that rentals are paid on an

annuity basis, normal rules governing export credit policy

apply. Thus as least 10% (15% for leases beyond 2 years) of

the value of the goods leased is payable by delivery with the

balance paid at not longer than 6 monthly intervals over a

period commensurate with those applicable to a sale of the

goods on credit terms.

iii Cover is against non receipt of rent due under the leasing

contract but is subject to a limitation that in the event of

default it applies only to rent due up to the date on which

the contract can be terminated or up to 90 days after default,

1

Page 30Page 31