Finance Leasing Manual - FLM23.04

Backing out: facility agreements

The arrangements for backing out may be formalised in a 'facility agreement' or a 'master lease agreement'. The facility agreement will set out the terms on which the head lessor is prepared to purchase the underlying assets, including for example the maximum total expenditure and the proposed dates for any backing out transactions. The master lease agreement will set out the terms on which assets backed out will be leased back to the intermediate lessor (the actual leases would be described as schedules to this agreement).

In practice a number of similar leases entered into by the intermediate lessor will be bundled together and the underlying assets will be included in a single head lease. The head lessor will not know what the assets are and will seek guarantees from the intermediate lessor.