In accounting terms the lessee company may have an operating
lease (not a finance lease) because it doesn't have the benefit of
the asset for its full life (just like any tenant of building who
has a lease for less than the life of the building.) After twenty
years the lease ends and the fellow group member (the option holder
who becomes the landlord) will hold the asset unencumbered by any
lease. Because the lease is an operating lease, the total rentals
due to be paid by the lessee for the whole twenty years of the
lease will, ordinarily, be deducted in the commercial accounts
evenly over the entire lease period.
At the group level the Borrower will have a finance lease
from the Bank because the deal ensures the Borrower gets back the
original interest. But the group position is not relevant when
considering the position of any individual group member.
