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Lease Portfolio Purchase Due Diligence

BY Anthony L. Lamm
March 27, 2014

Editor's Note: This article is the third in a continuing series on sophisticated leasing issues.'

This article examines the due diligence steps that every lawyer must address when advising a client about the merits of purchasing an equipment lease portfolio. Years of legal due diligence reviews of clients' proposed portfolio purchases, a great deal of common sense, a well-developed checklist and a number of war stories from experience have taught us not only the importance of conducting a legal due diligence review, but also the steps to take to ensure that an educated decision can be made concerning the risks inherent in purchasing a particular portfolio.

Performing due diligence investigations is far more important and far more far-reaching than only ferreting out fraud. We are not minimizing the extreme care that a lease finance company must take to prevent loss due to fraud, but this article addresses what steps a lease finance company must take to improve the portfolio purchase realization rate along with minimizing fraud, and servicing issues concerning default, late payment, or no payment, plus many other concerns, through an effective due diligence investigation. No effort is made to discuss the negotiation of business and legal points of a portfolio purchase agreement unless it relates to accompanying due diligence investigations that could assist in a mutually successful arrangement. We can leave the negotiation of business and legal provisions of a portfolio purchase to a future article.

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