A lease certificate is a security issued by an asset leasing company in order to finance the assets that are acquired or leased, and which entitles its holders to the revenues attained from such assets in proportion to their shares.
Regulations concerning the issuance of lease certificates have been completed by the Capital Markets Board of Turkey and they are introduced to the capital markets as alternative instruments to allow companies to raise funds from the capital markets.
Asset lease companies are joint stock corporations incorporated by brokerage houses, banks and originators, exclusively in order to issue lease certificates. Asset lease companies are incorporated by the originators with the purpose of generating lease income by subletting to the originators the assets assigned to them by the originators, issuing lease certificates backed by the returns from such lease, and assigning the asset in question back to the originator at the end of the lease term.
Since lease certificates are backed by assets which may be sold and liquidated, they are of a more conservative nature, and therefore offer a more secure alternative for investors.
The system basically depends on the originator company to raise funds by subletting the assets it assigned to the asset lease company. At the first phase, asset lease companies finance these assets through the lease certificates it issues, and use the periodical lease revenues from the originator for the periodical payments of the lease certificates. At the end of the lease term, the revenues from the assets transferred back to the originator are distributed to the lease certificate holders pro rata their shares, thereby redeeming the issued lease certificates.
Lease certificates may be offered to the public, sold by allocation method, or may be issued to qualified investors only.