BNKG- 5307: Lease and Investment Banking

Chapter- Introduction
Concept of Lease Finance
A lease could be generally defined as, A contract where a party being the owner (lessor) of an asset
(leased asset) provides the asset for use by the lessee at a consideration (rentals), either fixed or
dependent on any variables, for a certain period (lease period), either fixed or flexible, with an
understanding that at the end of such period, the asset, subject to the embedded options of the
lease, will be either returned to the lessor or disposed off as per the lessor‘s instructions. Leasing
was prevalent during the ancient Sumerian and Greek civilizations where leasing of land,
agricultural implements, animals mines and ships took place. The practice of leasing came into
being sometime in the later half of the 19th century where the rail road manufacturers in the U.S.A
resorted to leasing of rail cars and locomotives.
The equipment leasing industry came into being in 1973 when the first leasing company,
appropriately named as First Leasing This industry however remained relegated to the background
until the early eighties, because the need for these industry was not strongly felt in industry. The
public sector financial institutions – IDBI, IFCI, ICICI and the State Financial Corporation‘s
(SCFs) provided bulk of the term loans and the commercial banks provided working capital
finance required by the manufacturing sector on relatively soft terms. Given the easy availability
of funds at reasonable cost, there was obvious no need to look for alternative means of financing.
The credit squeeze announced by the R.B.I coupled with the strict implantation of the Tandon &
Chore committees‘ norms on Maximum Permissible Bank Finance (MPBF) for working capital
forced the manufacturing companies to divert a portion of their long – term funds for their working
capital.

History and development of Leasing

The history of leasing dates back to 200BC when Sumerians leased goods. Romans had developed
a full body law relating to lease for movable and immovable property. However the modern
concept of leasing appeared for the first time in 1877 when the Bell Telephone Company began
renting telephones in USA. In 1832, Cottrell and Leonard leased academic caps, grown and hoods.
Subsequently, during 1930s the Railway Industry used leasing service for its rolling stock needs.
In the post war period, the American Air Lines leased their jet engines for most of the new air
crafts. This development ignited immediate popularity for the lease and generated growth of
leasing industry.
The concept of financial leasing was pioneered in India during 1973. The First Company was set
up by the Chidambaram group in 1973 in Madras. The company undertook leasing of industrial
equipment as its main activity. The Twentieth century Leasing Company Limited was established
in 1979. By 1981, four finance companies joined the fray. The performance of First Leasing
Company Limited and the Twentieth Century Leasing Company Limited motivated others to enter
the leasing industry. In 1980s financial institutions made entry into leasing business. Industrial
Credit and Investment Corporation was the first all India financial institution to offer leasing in

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1983. Entry of commercial banks into leasing was facilitated by an amendment of Banking
Regulation Act, 1949. State Bank of India was the first commercial bank to set up a leasing
subsidiary, SBI capital market, in October 1986. Can Bank Financial Services Ltd., BOB Financial
Service Ltd., and PNB Financial Services Limited followed suit. Industrial Finance Corporation‘s
Merchant Banking division started financing leasing companies as well as equipment leasing and
financial services. There was thus virtual explosion in the number of leasing companies rising to
about 400 companies in 1990.
In the subsequent years, the adverse trends in capital market and other factors led to a situation
where apart from the institutional lessors, there were hardly 20 to 25 private leasing companies
who were active in the field. The total volume of leasing business companies was Rs.5000 crores
in 1993 and it is expected to cross Rs.10, 000 crores by March 1995.
Background of Leasing in Bangladesh
Lease financing was first introduced in Bangladesh in the early 1980s. Industrial Development
Leasing Company of Bangladesh Ltd. (idlc), the first leasing company of the country, was
established in 1986 under the regulatory framework of BANGLADESH BANK. It was a joint
venture of the Industrial Promotion and Development Company of Bangladesh Ltd. (ipdc),
International Finance Corporation, and Korea Development Leasing Corporation. Another leasing
firm, the UNITED LEASING COMPANY Ltd. started its operations in 1989. The number of
leasing companies grew quickly after 1994 and by the year 2000, rose to 16. The leasing business
became competitive with the increase in the number of companies and wider distribution of their
market share. There are, however, 6 other companies conducting leasing business in the country,
although they do not use the word leasing in their names. In terms of money value, the leasing
business in Bangladesh increased from Tk 41.44 million in 1988 to Tk 3.16 billion in 2000.
The leasing companies now operating in the country are Industrial Development Leasing Company
of Bangladesh, United Leasing Company, GSP Finance Company (Bangladesh), Uttara Finance
and Investments, Bay Leasing and Investment, Phoenix Leasing Company, Prime Finance and
Investment, International Leasing and Financial Services, Union Capital, Vanik Bangladesh,
Peoples Leasing and Financial Services, Bangladesh Industrial Finance Company,
UAEBangladesh Investment Company, Bangladesh Finance and Investment Company, and First
Lease International.
Lease financing, as organised in Bangladesh, operates with the following objectives: (a) to assist
the development and promotion of productive enterprises by providing equipment lease financing
and related services; (b) to assist in balancing, modernisation, replacement and expansion of
existing enterprises; (c) to extend financial support to small and medium scale enterprises; (d) to
provide finance for various agriculture equipment; and (e) to activate the capital market by
operating as managers to the issue, underwriters, or portfolio managers.
The functions of a lease business include lease financing, short-term financing, house building
financing, and merchant banking and corporate financing. In this last group of functions, the
leasing business in Bangladesh moved away from regular leasing activities and is now involved in
stock-market related activities such as issue management, underwriting, trust management, private

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placement, portfolio management, and mutual fund operation. Broad capital market operations of
the lease financing institutions include bridge financing, corporate counseling, mergers and
acquisition, capital restructuring, financial engineering, and lease syndication. Prominent among
the sectors of the economy that now receive lease financing services are textiles, apparels and
accessories, transport, construction and engineering, paper and printing, pharmaceuticals, food and
beverage, chemicals, agro-based industries, telecommunications, and leather and leather products.
Commercial banks and development finance institutions (DFIs) have been the traditional lending
institutions in Bangladesh. In fact, the concept of lease financing is a relatively new one in the
country. Initially, leasing companies had to adopt the role of educators to make Bangladeshi
entrepreneurs aware of the benefits of leasing. However, as DFIs demonstrated poor recovery and
fund recycling performances, leasing got the opportunity to develop as an alternative source of
funding. A few other factors also contributed to development of the leasing business in the country.
For example, the commercial banks have been keener in providing trade financing and FOREIGN
EXCHANGE dealings rather than long-term loans because of the risks involved and their longer
gestation period. The selection of lease proposals is relatively free from extraneous pressure and
is subject to a quality level appraisal. Under lease agreements in the private sector, projects are
sanctioned and implemented expeditiously, resulting in benefits in time and cost savings. Private
leasing companies also attract clients by providing relatively better services. The down payments
in leasing are not high and the gestation period is low. Also, in case of lease financing, incidental
costs incurred in the process of import clearing, installation, and commercial production are
capitalised, which substantially reduce the initial investment.
Leasing companies, however, face some problems in conducting their business in the country. The
relatively slow growth of the demand side compared to the fast growth of the lease business is one
such problem. This leads many leasing companies to operate in partial capacity. The culture of
loan default that prevails in the country is also a deterrent. Leasing companies often find it difficult
to raise funds through short- or long-term borrowing from money and capital markets. They are
hard pressed to deal with the financial assets because of the present laws of the country, which are
also not fully enforceable.
Leasing business is gaining increased importance in the economy of Bangladesh with its gradual
transformation from an agrarian to industrial one. The government periodically revises the trade
and industrial policy to create a liberal business environment both for domestic and foreign
investment. Increased investment in the energy sector as well as in power, transport,
telecommunications, water and sanitation, and safe disposal of wastes is expected to bring further
opportunities for leasing industries.
Importance of Lease Finance
Lease finance or lease financing means contract between owner of asset and user of asset. In this
contract only rent is paid at periodical intervals for using of asset by user. If user of asset has no
money to pay initial amount of leasing contract, he can also do contract with third part to pay initial
amount or specific period rent of lease. It will be also lease finance. In following words, we can
explain its importance,

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 Lease finance is easy to get than getting loan for buying all fixed assets.
 Monthly rent payment for lease finance will be operating expenses. It will be allowed to
deduct total income. So, company can get tax benefits in lease financing.
 It can show as invisible debt of company out of its balance sheet. You can show lease
finance in the footnote of balance sheet, if you did contract directly with the owner of asset.
 One of major important point is that it is more flexible way of finance. You can fix your
need of asset and get it one lease through lease financing.
 A study from IFC has revealed that 30% of total share of lease financing as investment of
fixed asset is of emerging and developed economies and now 15% of developing countries.
Legal aspects of leasing
Essentially the following implications for the lessor and the lessee must be maintained
 The lessor has the duty to deliver the asset to the lessee, to legally authorise the lessee to
use the asset, and to leave the asset in peaceful possession of the lessee during the currency
of the agreement.
 The lessor has the obligation to pay the lease rentals as specified in the lease agreement, to
protect the lessor‘s title, to take reasonable care of the asset, and to return the leased asset
on the expiry of the lease period.
Contents of a lease agreement
The lease agreement specifies the legal rights and obligations of the lessor and the lessee. It
typically contains terms relating to the following:
 Description of the lessor, the lessee, and the equipment.
 Amount, time and place of lease rentals payments.
 Time and place of equipment delivery.
 Lessee‘s responsibility for taking delivery and possession of the leased equipment.
 Lessee‘s responsibility for maintenance, repairs, registration, etc. and the lessor‘s right in
case of default by the lessee.
 Lessee‘s right to enjoy the benefits of the warranties provided by the equipment
manufacturer/supplier.
 Insurance to be taken by the lessee on behalf of the lessor.
 Variation in lease rentals if there is a change in certain external factors like bank interest
rates, depreciation rates, and fiscal incentives.
 Options of lease renewal for the lessee.
 Return of equipment on expiry of the lease period.
 Arbitration procedure in the event of dispute.
Lease
Conceptually, a lease may be defined as a contractual arrangement/transaction in which a party
owning an asset/ equipment (lessor) provides the asset for use to another/ transfers the right to use
the equipment to the user (lessee) over a certain/for an agreed period of time for consideration in
the form of/in return for periodic payment (rentals) with or without a further payment (premium).

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At the end of the period of contract (lease period), the asset/ equipment reverts back to the lessor
unless there is a provision for the renewal of the contract.
Leasing essentially involves the divorce of ownership from the economic use of an asset/
equipment. It is a contract in which a specific equipment required by the lessee is purchased by
the lessor (financier) from a manufacturer/vendor selected by the lessee. The lessee has possession
and use of the asset on payment of the specified rentals over a predetermined period of time.
Leasing is, thus, a device of financing/money lending.
GAAP defines a lease as ―an agreement conveying the right to use property, plant, or equipment
usually for a stated period of time.‖ A lease involves a lessee and a lessor. A lessee acquires the
right to use the property, plant, and equipment; a lessor gives up the right.
The position of a lessee is akin to that of a person who owns the same asset with borrowed money.
The real function of a lessor is not renting of asset but lending of funds/finance/credit and lease
financing is, in effect, a contract of lending money. The lessor (financier) is the nominal owner of
the asset as the possession and economic use of the equipment vests in the lessee. The lessee is
free to choose the asset according to his requirements and die lessor does not take recourse to the
equipment as long as the rentals are regularly paid to him.
Essentials of Lease Financing
The essential elements of leasing are the following:
Parties to the Contract: There are essentially two parties to a contract of lease financing, viz. the
owner and the user, respectively called the lessor and the lessee. Lessors as well as lessees may be
individuals, partnerships, joint stock companies, corporations or financial institutions. Sometimes,
there may be joint lessors or joint lessees, particularly where the properties or the amount of
finance involved is enormous.
Lease-broker: There may be a lease-broker who acts as an intermediary in arranging lease deals.
Merchant banking divisions of certain foreign banks in India, subsidiaries of some Indian banks
and even some private merchant bankers are acting as lease-brokers. They charge certain
percentage of fees for their services, ranging between 0.50 to 1 percentages.
Lease financier: A lease contract may involve a lease financier, who refinances the lessor, either
by providing term loans or by subscribing to equity or under a specific refinance scheme.

Asset: The asset, property or equipment to be leased is the subject-matter of a contract of lease
financing. The asset may be an automobile, plant and machinery, equipment, land and building,
factory, a running business, aircraft, and so on. The asset must, however, be of the lessee's choice
suitable for his business needs.
Ownership Separated from User: The essence of a lease financing contract is that during the
lease-tenure, ownership of the asset vests with the lessor and its use is allowed to the lessee. On
the expiry of the lease tenure, the asset reverts to the lessor.

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Types of Lessors
Lessors generally come in one of four varieties:
1. Captive leasing companies: These are usually subsidiaries of a parent company that
manufactures the product being leased, e.g., IBM Credit Corp. leases IBM computers.
2. Commercial banks: Companies enter into leasing agreements with banks they already do
business with or by other means. Sometimes banks buy and sell their lease portfolios, or serve as
the front end for an outside leasing service.
3. Independent leasing companies: These firms typically are unaffiliated with the manufacturer
or the lessee and derive most of their business from leasing to businesses, e.g., GE Capital provides
general leasing and financing services for a diverse range of commercial and industrial equipment.
4. Brokers: Leasing brokerages act as intermediaries to link lessees and lessors.
Types of Leasing
FASB (Financial Accounting Standards Board) divides lease from the lessee‘s standpoint into
groups, capital lease and operating lease. Also two types of hybrid lease discussed most commonly
and that are leveraged leases and sale and leaseback.
1. Finance Lease or Net Lease or Capital Lease:
An agreement where the lessor receives lease payments to cover its ownership costs. The lessee is
responsible for maintenance, insurance, and taxes. Some finance leases are conditional sales or
hire purchase agreements.
In other words, A long-term lease in which the lessee must record the leased item as an asset on
his/her balance sheet and record the present value of the lease payments as debt. Additionally, the
lessor must record the lease as a sale on his/her own balance sheet. A capital lease may last for
several years and is not callable. It is treated as a sale for tax purposes. It is also called a financial
lease.
Structure of Financial Lease: A finance lease is structured to include the following features,
 The lessee (the intending buyer) selects the equipment according to his requirements, from
its manufacturer or distributor.
 The lessee negotiates and settles with the manufacturer or distributor, the price, the delivery
schedule, installation, terms of warranties, maintenance and payment, and so on.
 The lessor purchases the equipment either directly from the manufacturer or distributor
(under straight- forward leasing) or from the lessee after the equipment is delivered (under
sale and lease back).
 The lessor then leases out the equipment to the lessee. The lessor retains the ownership
while lessee is allowed to use the equipment.
 A finance lease may provide a right or option, to the lessee, to purchase the equipment at a
future date. However, this practice is rarely found in Bangladesh.

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 The lease period spreads over the expected economic life of the asset. The lease is
originally for a non- cancelable period called the primary lease period during which the
lessor seeks to recover his investment along with some profit. During this period,
cancellation of lease is possible only at a very heavy cost. Thereafter, the lease is subject
to renewal for the secondary lease period, during which the rentals are substantially low.
 The lessee is entitled to exclusive and peaceful use of the equipment during the entire lease
period provided he pays the rentals and complies with the terms of the lease.
 As the equipment is chosen by the lessee, the responsibility of its suitability, the risk of
obsolescence and the liability for repair, maintenance and insurance of the equipment rests
with the lessee.
The finance company is the legal owner of the asset during duration of the lease. However the
lessee has control over the asset providing them the benefits and risks of (economic) ownership.

2. Operating Lease or Service Lease

According to the IAS-17, an operating lease is one which is not a finance lease. In an operating
lease, the lessor does not transfer all the risks and rewards incidental to the ownership of the asset
and the cost of the asset is not fully amortized during the primary lease period. The lessor provides
services (other than the financing of the purchase price) attached to the leased asset, such as
maintenance, repair and technical advice. For this reason, operating lease is also called service
lease. The lease rentals in an operating lease include a cost for the 'services' provided, and the
lessor does not depend on a single lessee for recovery of his cost. Operating lease is generally used
for computers, office equipments, automobiles, trucks, some other equipment, telephones, and so
on.
Structure of Operating Lease:
 An operating lease is-generally for a period significantly shorter than the economic life of
the leased asset. In some cases it may be even on hourly, daily, weekly or monthly basis.
The lease is cancellable by either party - during the lease period.
 Since the lease periods are shorter than the expected life of the asset, the lease rentals are
not sufficient to totally amortize the cost of the assets.

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 The lessor does not rely on the single lessee for recovery of his investment. He has the
ultimate interest in the residual value of the asset. The lessor bears the risk of obsolescence,
since the lessee is free to cancel the lease at any time.
 Operating leases normally include the maintenance clause requiring the lessor to maintain
the leased asset and provide services such as insurance, support staff, fuel, and so on.
3. Leveraged Lease
There are three parties to the transaction: (i) lessor (equity investor), (ii) lender and (iii) lessee. In
such a lease, the leasing company (equity investor) buys the asset through substantial borrowing
with full recourse to the lessee and without any recourse to itself. The lender (loan participant)
obtains an assignment of the lease and the rentals to be paid by the lessee are a first mortgaged
asset on the leased asset. The transaction is routed through a trustee who looks after the interest of
the lender and lessor. On receipt of the rentals from the lessee, the trustee remits the debt-service
component of the rental to the loan participant and the balance to the lessor.
4. Sale and leaseback
In a sale and leaseback transaction, the owner of equipment sells it to a leasing company which in
turn leases it back to the erstwhile owner (the lessee). The ‗leaseback‘ arrangement in this
transaction can be in the form of a ‗finance lease‘ or an ‗operating lease‘. A classic example of
this type of transaction is the sale and leaseback of safe deposit vaults resorted to by commercial
banks. Under this arrangement the bank sells the safe sells the safe deposit vaults in its custody to
a leasing company at a market price which is substantially higher than the book value.
In general, the ‗sale and leaseback‘ arrangement is a readily available source of funds for financing
the expansion and diversification programs of a firm. In case where capital investments in the past
have been funded by high cost short-term debt, the sale and lease back transaction provides an
opportunity to substitute the short-term debt by medium-term finance (assuming that the leaseback
arrangement is a finance lease). From the leasing company‘s angle a sale and leaseback transaction
poses certain problems. First, it is difficult to establish a fair market value of the asset being
acquired because the secondary market for the asset may not exist; even if it exists, it may lack
breadth. Second, the Income Tax Authorities can disallow the claim for depreciation on the fair
market value if they perceive the fair market value as not being ‗fair‘.
Before taking on a sale and lease back operation or on a sale and rent back operation, a company
has to take the following elements into consideration:
 The assets to be sold must be fully owned and free of any security obligations.
 If the company's goodwill is pledged in favor of a bank, this bank must give its consent
prior to the deal being signed.
 The sale of assets can generate either a windfall or shortfall, either of which must be taken
into account from a fiscal and/or accounting point of view.
Opportunities of sale and lease back

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A sale and rent back operation is the answer to many problems your company may be facing
regardless of its size.
 safeguard the availability of capital stock
 preserve the availability of bank credit facilities
 make funds available for a new project
 restructure the debts
 cash in a latent asset appreciation
 realise, in certain conditions, a company tax saving
Some variants of leases
1. Direct Lease
A direct lease can be defined as any lease transaction which is not a ―sale and leaseback‖
transaction. In other words, in a direct lease, the lessee and the owner are two different entities. A
direct lease can be of two types: Bipartite Lease and Tripartite Lease.
 Bipartite Lease: In a bipartite lease, there are two parties to the transaction – the equipment
supplier cum-lessor and the lessee. The bipartite lease is typically structured as an operating
lease with in-built facilities like up gradation of the equipment (upgrade lease) or additions
to the original equipment configuration. The lessor undertakes to maintain the equipment
and even replaces the equipment that is in need of major repair with similar equipment in
working condition (swap lease). Of course, all these add-ons to the basic lease arrangement
are possible only if the lessor happens to be a manufacturer or a dealer in the class of
equipments covered by the lease.
 Tripartite Lease: A tripartite lease on the other hand is a transaction involving three
different parties -the equipment supplier, the lessor, and the lessee. Most of the equipment
lease transactions fall under this category. An innovative variant of the tripartite lease is
the sales-aid lease where the equipment supplier catalyzes the lease transaction. In other
words, he arranges for lease finance for a prospective customer who is short on liquidity.
Sales-aid leasing can take one of the following forms:

a) The equipment supplier can provide a reference about the customer to the leasing company.
b) The equipment supplier can negotiate the terms of the lease with the customer and complete
the necessary paper work on behalf of the leasing company.
c) The supplier can write the lease on his own account and discount the lease receivables with
the designated leasing company.
d) The effect of the transaction is that the leasing company owns the equipment and obtains
an assignment of the lease rental. By and large, sales-aid lease is supported by recourse to
the supplier in the event of default by the lessee. The recourse can be in the form of the
supplier offering to buy back the equipment from the lessor in the event of default by the
lessee or in the form of providing a guarantee on behalf of the lessee.
2. Domestic Lease and International Lease

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 Domestic Lease: A lease transaction is classified as domestic if all parties to the

agreement, namely, equipment supplier, lessor and the lessee, are domiciled in the same
country.
 International Lease: If the parties to the lease transaction are domiciled in different
countries, it is known as international lease. This type of lease is further sub classified into
import lease and cross-border lease.
Comparison between Leasing and Ownership
Many times, comparisons between leasing and owning come down to little more than a funding
comparison. And certainly, leasing almost always allows a better cash flow for individuals and
corporations.
1. Improvement of cash flow: The main advantage of leasing is that it frees up cash.
Equipment leases rarely require down payments, though you may have to set aside
some cash for a refundable security deposit. By contrast, loans to finance the
purchase of equipment typically require down payments of up to 25 percent or
more.
2. Easier to finance than purchases: Before extending a capital equipment loan,
banks will usually want to see two to three years of financial records — which most
new companies do not have. Leasing companies, on the other hand, usually require
only six months to a year of credit history before approving a furniture or office
equipment lease.
3. Sales Tax Implications: The impact of sales and use tax can vary dramatically
based on whether a vehicle is leased or owned. Consider this; tax is applied to the
lease vehicle's monthly rental payment instead of being an up-front charge against
the vehicle's initial purchase cost. Paying taxes on the monthly payment stream not
only reduces the total tax paid, but also improves cash flow.
4. Keep pace with technology: Leasing is especially attractive if your business relies
upon cutting-edge technology such as the latest computers, communications
devices, or other equipment. A series of short-term leases will cost you less than
buying new equipment every year or two. Some office equipment leases even have
yearly computer upgrades built into them — eliminating that difficult decision of
whether you can afford to upgrade or not.
5. Allows affording more: While you might not be able to afford to purchase those
pricey ergonomic chairs your employees are asking for, you may be able to lease
them. Better furniture and equipment can create a more professional image and
boost morale and productivity.
6. Balance sheet benefits: You may be able to exclude some leased assets and related
obligations from your balance sheet. Such moves might improve financial
indicators such as your firm's debt-to-equity ratio or earnings-to-fixed-assets ratio.
Bear in mind, however, that accounting rules do require your balance sheet to report
assets leased under certain types of agreements.
Differences between Finance and Operating Leases

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Financial Lease
Risks and rewards of ownership are transferred to,
and borne by, the lessee. This includes the risks of
accidental ruin or damage of the asset (although
these risks may be insured or otherwise assigned).
Thus damage that renders an asset unusable does
not exempt the lessee from financial liabilities
before the lessor.
The goal of the lessee is either to acquire the asset
or at least use the asset for most of its economic
life. As such, the lessee will aim to cover all or
most of the full cost of the asset during the lease
term and therefore is likely to assume the title for
the asset at the end of the lease term. The lessee
may gain the title for the asset earlier, but not
before the full cost of the asset has been paid off.
The lessor retains legal ownership for the duration
of the lease term, though the lessee may or may not
buy out the leased asset at the end of the lease, with
the lessor charging only a nominal fee for the
transfer of asset to the lessee.
The lessee chooses the supplier of the asset and
applies to the lessor for funding. This is significant
because the leasing company that funds the
transaction should not be liable for the asset
quality, technical characteristics, and
completeness, even though it retains the legal
ownership of the asset. The lessee will also
generally retain some rights with respect to the
supplier, as if it had purchase asset directly.
BNKG- 5307: Lease and Investment Banking
Operating Lease
Economic ownership with all
corresponding rights and responsibilities
are borne by the lessor. The lessor buys
insurance and undertake responsibility for
maintenance.
The goal of the lessee is usage of the leased
asset for a specific temporary need, and
hence the operating lease contract covers
only the short-term use of the asset.
Further, the duration of an operating lease
is usually much shorter than the useful life
of the asset.
It is not the lessee‘s intention to acquire the
asset, and lease payments are determined
accordingly. In addition, an asset under an
operating lease may subsequently be rented
out.
The present value of all lease payments is
significantly less than the full asset price.
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