In the first half of 2008, the German
leasing market achieved growth of more than 10 percent. Today,
however, following intensification of the international financial
crisis, leasing companies are largely cautious and it has become an
established fact that the crisis has affected even German

As such, the federal state banks that previously refinanced
leasing businesses are increasingly retreating from this

Large institutional leasing companies can use corporate
refinancing as an alternative because they mostly have a suitable
banking background.

However, many small lessors have considerable refinancing
problems and in some cases are no longer able to support their
customers with new business. Even large captives have significantly
fewer corporate resources for their leasing business.

Significant market consolidation is looming. Various
institutional leasing companies that were previously successful on
the market are now up for sale. On the other hand, the general rise
in the cost of credit has, of course, also made it easier for
lessors to enforce considerably higher margins in new business.

At Expo-Real in Munich last month, it was reported that banks
would be setting completely new conditions in the area of property

Whereas, until recently, investors required equity capital of
only 15 to 20 percent, many capital market banks are now demanding
that borrowers have 50 percent of the equity capital for commercial
property financing before a lending commitment is made.

Naturally, this also affects many classic property leasing
objects in Germany because – due to the good solvency of the
leasing customers – the mortgage and capital market banks have, in
the past, mostly taken on 100 percent financing on a nonrecourse

It remains to be seen whether the recapitalisation shield of €80
billion, offered to the banks by the Federal Republic of Germany,
will be sufficiently exploited to maintain the borrowing power of
the banks and avoid a credit crunch.

If this happened, it would have a massive impact on the leasing
business, which is predominantly refinanced by credit.

In addition to this is the severe decline in economic growth,
which will result in a corresponding decline in investment
financing and, therefore, more limited leasing business.

The industry is rightly wondering how its customers will survive
the impending recession.

Prof HC Klaus Feinen

The author, now retired, is on the board of
Germany's Association of Chief Financial Officers