This chapter covers the following topics:
As a lessor, you are likely to want to sell some of your contracts and revenue streams to investors. Investor agreements allow you to manage syndication and securitization from a lessor's perspective. When you activate an investor agreement, Oracle Lease and Finance Management completes transactions and account processing on the contracts. Leasing companies fund leased equipment in different ways.
The following list summarizes the basic functions in investor agreements.
You can fund the equipment with your own capital, borrow funds from a lender, or share the cost of the equipment with investors. Syndication is the business where finance organizations face the situation of a finance amount (loan or lease) that is greater than what they can afford, such as big tickets like leasing airplanes or petroleum equipment. They may either lack the funds or may not want to accept risk for the entire deal. To acquire necessary funding or to spread the risk, lessors gather more than one investor or bank to finance the deal. In every syndicated loan there is always one managing company, typically a bank, that controls communications and logistics and collects additional service fees. In a syndication, each individual investor can be priced differently, meaning each would have its own rate of return and is individually at risk and could have different levels of servicing fees.
Investor agreements contain terms and conditions under which investors participate in lease contracts. Large contracts may involve syndications, where investors fund parts of the contract to spread risk. Investor agreements may group contracts in pools to sell their future cash flows.
To define a syndication under Investor Agreements:
Associate one contract to a pool.
Securitization is used by financiers to pool a set of contracts of the same nature, term, and risk rating. They breakdown the pool into shares and sell the shares in a security to investors. Financiers generally turn unrealized profit spread over time into current realized earnings, shorten the ROI period, and raise more funds to continue running their business. Securitization is a common practice in the mortgages and other long-term portfolio businesses.
In leasing scenarios with investors, the lessor sells the anticipated revenue streams and, in return, investors share the burden of the equipment purchase. This arrangement benefits lessors because investors share the risk of the deal, and the initial cost of the asset is recovered. Investors may benefit by sharing the earnings of the lease transactions and earning a higher rate of return.
To define a securitization under Investor Agreements:
Associate multiple contracts to a pool.
To define both a syndication and securitization:
Associate the pool to an investor agreement.
Define the investors and their share of the future cash flows on the investor agreement.
Process contract transactions and generate related investor disbursements.
Configure the accounting for contracts associated with an investor agreement differently than contracts not associated with investor agreements.
Process income recognition for contracts including adjustment of income for the sale of future receivables or participation.
Create loss provisions for investor agreements.
Define Buy Back conditions for investors' future cash flows.
Terminate investor agreements.
The type of contracts that can be attached to an Investor Agreement are Fixed Rate Lease and Fixed Rate Loan. Oracle Lease and Finance Management allows Fixed rate Lease and Fixed Rate Loan contracts to be added to a pool. Currently, Variable Rate Contracts are not supported in Investor Agreement.
The following table lists prerequisites for investor agreements.
Task | Reference Sections (primarily in Oracle Lease Management Implementation Guide) |
---|---|
Set up rate for general loss provision. | Set up Loss Provision Rates, Oracle Lease Management Implementation Guide |
Set up streams for loss provisions. | Define Stream Types, Oracle Lease Management Implementation Guide |
Set up financial products to be associated with accounting templates to define the accounting for investment agreements. | Define Financial Products, Oracle Lease Management Implementation Guide |
Set up an investor agreement accounting template set. Use the seeded transaction type, Investor. |
Define Lease Accounting Templates, Oracle Lease Management Implementation Guide |
Define investor accounting code. | Define Account Generator, Oracle Lease Management Implementation Guide |
Define formula for buy back. | Define Formulas, Oracle Lease Management Implementation Guide |
Define the investor transaction type in Oracle Receivables. | Define Transaction Types, Oracle Lease Management Implementation Guide |
Set up the investor invoice grouping rules OKL_INVESTOR_GRP_RL in Oracle Receivables. | Set Up Grouping Rules for Invoices, Oracle Lease Management Implementation Guide |
Define OKL_INVESTOR transaction source in Oracle Receivables. | Define Transaction Sources, Oracle Lease Management Implementation Guide |
Define line transaction flexfield structure for investor agreements. | Define Line Transaction Flexfield Structure, Oracle Lease Management Implementation Guide |
Define Aging Buckets. | Define Aging Buckets, Oracle Lease Management Implementation Guide |
Set up accounting templates for association with the investor product for the following events and processes:
Investor Agreement Activation
Billing
Disbursement
Accrual
The accounting template for investor accrual adjustment is set up on the accounting template set related to the contract.
See: Define Lease Accounting Templates in the Oracle Lease and Finance Management Implementation Guide.
Investor Agreement Activation
When you create the accounting template for the investor agreement activation process, use the seeded transaction type, Investor. In addition, you may want to create your own accounting lines for the following purposes:
Create an investor stake using the stream type of the purpose Investor Receivables and the formula Investor Investment.
Create an accrual adjustment using the stream type of the purpose Investor Rental Accrual/Investor Pre-tax Income/Investor Interest Income and the formula Investor Accrual.
Billing
Billing transactions apply to payments from the investor. When you create the accounting template for billing processes, use the seeded transaction type, Billing.
Disbursement
Disbursement transactions apply to payments to the investor. When you create the accounting template for disbursement processes, use the seeded transaction type, Disbursement.
Accrual
Set up an accounting template for investor accrual adjustments in the accounting template set associated with the product of the contracts whose streams are securitized. Create accounting templates for accrual adjustment using the stream type of the purpose Investor Rental Accrual/Investor Pre-tax Income/Investor Interest Income.
Pooling contracts with their asset streams allows you to group receivables into financial instruments that are sold to investors.
You must select whether the pool is of type Fixed or Percent. If the pool type selected is Percent, the pool may contain one contract only. If the pool type selected is Fixed, you may add multiple contracts. For additional information on fixed pool types, refer to Investor Agreement for Fixed Pool Type.
The basic concepts for using pools in investor agreements are the following:
Group one or more lease and loan contracts into a pool
Define the future cash flows to be included in the pool:
cash flows during the base term of the contract (Rent, Advance Rent, Interim Rent, Principal payment, Interest payment), or
cash flows associated with the asset value at the end of the base term (residual)
Add or remove contracts or cash flows before the pool is activated. A pool becomes activated when its related investor agreement is activated.
Reconcile pool contents. This is the process to remove ineligible contracts from the pool before activating the agreement.
Update pool contents based on the current contract status and recalculate the pool values.
After activating the investor agreement, you can perform transactions on the contract, such as rebooking or termination. When you initiate transactions, such as a buy back, on the pool, Oracle Lease and Finance Management will automatically account for the transactions based on terms and conditions.
To terminate an investor agreement pool elements must be disbursed to investors.
The main topics in this section are:
Group Receivables Into Pools
Create a Pool
Add Contents to a Pool
Clean Up a Pool
Pool Transactions
Oracle Lease and Finance Management includes three seeded stream subclasses, which you cannot modify:
Rent, includes: rent, advanced rent, and interim rent stream purposes
Residual: residual value stream purposes
Loan Payment includes : Principal payment and Interest payment
Streams with subclasses of Rent, Residual, and Loan Payment can be included in the pool.
The first step is to create a pool of the expected revenue streams on one or more booked contracts.
Note: You can run concurrent programs to calculate and recalculate the pool principal amount and asset net investment, and to reconcile the pool contents when eligibility of streams have changed due to operations on the contract. See Concurrent Programs.
In this process, you create a pool and select the currency for the pool.
Perform the following steps using the Pools page:
Click Create. The Create Pool page opens.
Select the operating unit.
Note: The list of values includes operating units assigned to the MO: Security profile.
Additional Information: The application displays the selected operating unit as the default in the subsequent pages irrespective of the value that you set for the MO: Default Operating Unit profile option.
The selected operating unit restricts the valid list of values in applicable fields.
Select a legal entity to identify the first party on the agreement.
Note: Contracts with the selected legal entity become part of the pool.
Enter a number for the pool. It can be any format, but must be unique.
Select the currency for the pool.
Optionally, enter a short description, which appears in results of pool searches, and a more detailed description.
Select the Display in Lease Center check box if you want to view pool and investor agreement details in the Contract region of the Lease Center.
Note: The Display in Lease Center check box can be selected or deselected, even when the pool has a status of Active.
Click Apply to create the pool and add details later.
Now you can add lease contract streams to the pool.
You can find investor pools by performing a list search in the Pools tab of the Investors page. List search is a search tool that helps retrieve information quickly and easily.
Perform the following steps:
Click Show Filters.
Note: You can hide filters by clicking Hide Filters.
Select the objects using the following filters:
Operating Unit (mandatory field)
Pool Number
Short Description
Serial Number
Status
Last Update Date
You can also include additional filters by clicking Add and selecting a filter.
Note: You can remove the additional filters from the search criteria by clicking the remove filter icon next to each added criteria.
Click Go.
The search results are displayed.
You can save searches by performing the following steps:
After selecting filters, click Save.
Perform the following actions in the Create Saved Search region:
Enter a name for the saved search in the Name field.
Select the Display in Tile checkbox to display a tile having this search's details in the Pools tab.
Additional Information: Tiles display the count of search records for the defined search filters. This count can be refreshed by clicking the refresh icon present on each tile. Clicking on a tile will show the filters selected for this saved search.
Select the Set as Default checkbox to make a saved search as the default search.
Click OK.
Even if a saved search is not saved as a tile, it will be displayed in the drop down beside Show Filters/Hide Filters. You can manage saved searches by clicking Manage Saved Search in this drop down.
Note: You can disable list search using the Disable List Search button in Table Diagnostics. After disabling list search, you can find investor pools by performing either a simple or advanced search.
A simple search on the Pools tab includes the following parameters:
Operating Unit (mandatory field)
Pool Number
Short Description
Status
Last Update Date
An advanced search allows you to expand or refine their search criteria.
After creating a pool, you can modify the descriptions.
You must have created a pool, and have a current pool in context.
Perform the following steps in the Pools page:
In the Pool Number field, enter your pool number or name search string, and click Go.
In the Results region, click the hyperlink of the pool that you want to edit.
The Pool details page appears, with several read-only fields in the header.
Click Update to modify applicable details.
Click Apply.
After creating a pool, add cash flows of one or more booked contracts, which can be for a variety of fixed rate lease contracts and fixed rate loan contracts.
You must have created a pool, and have a current pool in context.
Oracle Lease and Finance Management requires basic eligibility criteria for contracts to be added to a pool. Contracts must:
Have Assignable selected in the contract header.
Be sure the contracts you plan to add to a pool have contract status Booked, and their contract header attribute must be Assignable.
Note: The Assignable check box is displayed during authoring a contract. See Create a Contract.
Conform to the following requirements. Each contract must
not be in delinquent status in Oracle Collections.
not be variable rate contracts.
Have the same Currency as the pool.
Have the same Legal entity as the pool.
Perform the following steps:
On the Add Pool Contents page, enter criteria for selecting contracts that you want to add to this pool. For example, leave the Customer and Contract regions fields empty. In the Streams region, enter January 31, 2004 to January 31, 2004; Stream Subclass Rent; from May 1, 2004 to May 31, 2004. Then click Submit.
This generates a request to run the concurrent program, Add Pool Contents.
Navigate to Processes > View Requests, select the request number, and click Submit.
On the View Request page that appears, click View Log.
This report displays the contracts that Oracle Lease and Finance Management added to this pool, in the upper section of the page. The lower section of the page lists contracts that have met the eligibility criteria that you entered, but Oracle Lease and Finance Management could not add to the pool because they did not meet the prerequisites.
Oracle Lease and Finance Management also lists the reasons that otherwise eligible contracts were not added to the pool, for each contract.
Streams with subclasses of Rent, Residual, and Loan Payment can be added to a pool.
At the bottom of the page are the criteria that you entered.
See Add Pool Contents Field References for selected field references.
After you view the report, go to Pool Clean Up to further refine your pool contents by deleting any undesired contracts.
You can view all the contracts that have asset streams that have been added to a pool.
You must have created a pool, have some contents in the pool, and have a current pool in context.
Use the Contents tab on the Pool details page to perform either a simple search or an advanced search. To perform an advanced search, go to Step 2.
To perform a simple search, enter or select one or more of the following criteria:
Customer Name
Contract Number
Stream Type Subclass
Stream Start Date range
Click Go, then skip to Step 3.
Click the Advanced Search button.
The Results region displays the following fields for each asset stream in the pool:
Contract Number
Asset Number
Lessee
Stream Type Subclass
Stream Type
Total Amount
Note: The fields are display-only.
You may click the Details icon to display the details, such as Due Date, Date Billed, and Amount, for each stream element.
Query the pool using the Pools page.
Click the Clean Up Pool Contents icon in the results area.
The Clean Up Pool Contents page for the applicable pool appears. On this page you can remove pool contents by clicking Generate Report to run the concurrent program, Clean Up Pool Contents.
Review the report to confirm the proposed changes that you want to make. Then return to the Clean Up Pool Contents page to again select eligibility criteria and remove pool elements according to the criteria you selected.
You may proceed directly to the Clean Up stage, which will remove the pool contracts that satisfy your search criteria. You are strongly advised, however, to perform the procedures in the specified order. This enables you to see the contracts that you will be removing from the pool, before you actually remove them.
Generate Report
Enter criteria for selecting contracts that you want to remove from the pool.
Click the Generate Report button.
This submits a request to run the concurrent program Clean Up Pool Contents. A message appears on the Pool Clean Up page, showing the Concurrent Request Number.
The report will appear as the output of the Clean Up Pool Contents program.
To see the output of the Clean Up Pool Contents program, see Run Concurrent Programs and View Reports In Oracle Lease and Finance Management.
The report shows which correct contract, asset, and stream elements will be changed or removed, using the simple or advanced search criteria that you specified in the Pool Clean Up page.
Continue to clean up. Or you can go back and enter a different set of eligibility criteria.
Clean Up
If you have confirmed that the correct pool elements will be removed according to the criteria selected earlier, and you have not changed the search criteria, click Submit.
This submits a request to run the concurrent program Clean Up Pool Contents, and to remove or change the pool elements that satisfy your search criteria. A message appears on the Pool Clean Up page, displaying the Concurrent Request Number. See Concurrent Programs.
You can view changes made to a pool of contract streams, after an investor agreement has been activated. See Activate The Agreement. The pool transaction options are: Add, Remove, and Replace.
You must have an activated investor agreement in context.
Perform the following:
Query the pool number using the Pools page.
Click the pool number hyperlink in the results area.
Use the Transactions tab on the Pool details page of the applicable pool to view to the pool transactions.
The following table displays the transactions that can occur on a contract in a pool, and the subsequent transaction that occurs in the pool.
Transaction on Contract | Subsequent Pool Transaction |
---|---|
Rebook | Replace |
Termination | Remove |
Asset Split | Replace |
Contract Re-Lease | Replace |
Asset Re-Lease | Replace |
Asset Disposal:
|
Remove |
Principal Paydown | Replace |
The following table displays the transactions that can occur on an investor agreement, and the subsequent transaction that occurs in the pool.
Transaction on Investor Agreement | Subsequent Pool Transaction |
---|---|
Activation | Add |
Buy Back | Remove |
Terminate | Remove |
An investor agreement in Oracle Lease and Finance Management includes the following:
Contracts and their future cash flows sold to investors.
The investors who have purchased a share of the future cash flows, and their respective shares.
Conditions and events on contracts that will generate disbursements to investors.
Terms and conditions for generating payment invoices to investors.
Special accounting requirements for contracts associated with the agreement.
The basis for buying back future cash flows from investors.
When an agreement is activated, Oracle Lease and Finance Management:
Bills investors for their investor stake.
Performs Quality Assurance checks to confirm compliance with the agreement.
Generates streams for managing:
Disbursements
Income adjustments
Investor Agreement
The main topics in this section are:
Create an Investor Agreement
Investors
Terms and Conditions
Activate The Agreement
Set up a Pool. Pool Number is a required field on an investor agreement.
Set up the parties, including the Trustee (often a vendor who acts as trustee for the investor agreement).
To create an investor agreement, perform the following steps:
In the Investor Agreements page, click Create.
The Create Investor Agreement page appears.
Note: Oracle Lease and Finance Management derives the legal entity from the pool.
Select the operating unit.
Note: The list of values includes operating units assigned to the MO: Security profile.
Additional Information: The application displays the selected operating unit as the default in the subsequent pages irrespective of the value that you set for the MO: Default Operating Unit profile option.
The selected operating unit restricts the valid list of values in applicable fields.
In the Agreement Number field, enter an agreement number.
In the Trustee field, select a trustee for the investor agreement from the list of values.
In the Product field, select a financial product from the list of values.
The read-only Type field is populated with Securitization or Syndication. The value is derived from the quality value of the quality Investor for the financial product selected above.
Note: The investor agreement type, whether Securitization or Syndication, appears on the Investor Details page when you assign the pool associated with the contract to an investor agreement.
In the Pool number field, select a pool number from the list of values.
Specify the currency conversion details for the investor agreement.
Enter the period during which the investor agreement is effective.
Specify the date by when the investor agreement must be approved.
Select an applicable recourse option.
In the note field, enter a note.
Click Apply to create an investor agreement and add details later.
You can find investor agreements by performing a list search in the Investor Agreements tab of the Investors page. List search is a search tool that helps retrieve information quickly and easily.
Perform the following steps:
Click Show Filters.
Note: You can hide filters by clicking Hide Filters.
Select the objects using the following filters:
Operating Unit (mandatory field)
Agreement Number
Pool Number
Product Name
Status
Effective From
Effective To
You can also include additional filters by clicking Add and selecting a filter.
Note: You can remove the additional filters from the search criteria by clicking the remove filter icon next to each added criteria.
Click Go.
The search results are displayed.
You can save searches by performing the following steps:
After selecting filters, click Save.
Perform the following actions in the Create Saved Search region:
Enter a name for the saved search in the Name field.
Select the Display in Tile checkbox to display a tile having this search's details in the Investor Agreements tab.
Additional Information: Tiles display the count of search records for the defined search filters. This count can be refreshed by clicking the refresh icon present on each tile. Clicking on a tile will show the filters selected for this saved search.
Select the Set as Default checkbox to make a saved search as the default search.
Click OK.
Even if a saved search is not saved as a tile, it will be displayed in the drop down beside Show Filters/Hide Filters. You can manage saved searches by clicking Manage Saved Search in this drop down.
Note: You can disable list search using the Disable List Search button in Table Diagnostics. After disabling list search, you can find investor agreements by performing either a simple or advanced search.
A simple search on the Investor Agreements tab includes the following parameters:
Operating Unit (mandatory field)
Agreement Number
Pool Number
Status
Product
Effective From
Effective To
An advanced search allows you to expand or refine their search criteria.
Many of the terms and conditions for investor agreements are defined as you provide them on these pages for each investor. For each investor, you enter the amount of the investor's stake, as well as important details of the revenue distribution, such as disbursement and revenue share.
The invoice is generated against each investor for the investor stake amount upon activation of the investor agreement. Investors then receive money as disbursements.
Select an investor agreement that has not yet been activated.
Perform the following steps:
Query for the investor agreement that you want to add investors to.
Click the investor agreement hyperlink in the results area. The Investor Agreement details page opens.
Click the Investors subtab and click Add Investor. The Add Investor page opens.
Enter the required information, which includes the investor, amount of investor stake, and payout details.
Click Apply.
Click the Investors subtab again. The investor you added appears on the Investor Agreement details page, along with this investor agreement status, investment date, and amount of investor's stake.
If there is more than one investor on this agreement, again click Add Investor.
Repeat these steps for each investor on the agreement.
On the Investor Agreement details page in the Investors subtab, click on an investor. Use the Investor details page to provide investor disbursement and revenue share details. Be sure to complete both steps.
You may navigate back and forth between the Investor Disbursement and the Revenue Share subtabs for each investor to make modifications, as long as the investor agreement is not yet activated.
Click Update to save your changes.
Click Investor Disbursement in the Investor details page. See Investor Disbursement Details Field References. Enter or select the required information. Then click Update.
The value that you select for Payment Terms is the terms of the disbursement that will be invoiced in Oracle Payables. For more information see the Oracle Payables User Guide.
Assuming your entries pass the validation checker, you will receive a Successfully Processed confirmation message. If not, go back and fix your entries according to the indications of any error messages.
Return to the Investor Details page (for example, click on the hypertext link that is the name or number of this investor) and complete the Revenue Share details.
Return to the Investors page (for example, click on the hypertext link that is the name or number of this investor) and click the Revenue Share subtab. The Investor Revenue Share Page is displayed.
Click Update.
Click Ad Revenue Share.
Search by stream type subclass. Click Go.
Select the applicable stream type subclasses.
Note: Late charge and Late interest are mandatory. Loan Payment is mandatory if the pool contents have Fixed rate Loan contracts and Rent and Residual are mandatory if Fixed rate lease contracts are part of the pool contents.
In the Share Percent fields, enter the percentage of the appropriate revenue stream in which the investor receives a share of the revenues.
The combined share of all investors for each of these Stream Type Subclasses cannot exceed 100 percent. If the total is less than 100 percent, the balance is the lessor's share.
Click Apply and return to the Investor Agreements page.
You can attach a fee for an investor agreement applicable to each investor. The fee could be either an Expense fee or an Income fee.
Expense Fee: You can define the Expense fee as a one-time fee. Specify the amount and the period for which the accrual of the expense fee is to be done. The expense fee can be disbursed to the investors once the agreement is activated.
Income Fee: You can define the Income fee as a one-time fee or a periodic fee. For a periodic income fee, define the payment schedule and bill the investors accordingly.
Steps:
Navigate to the Investor Agreement page.
Click the agreement number.
Select the Investors tab.
Select an investor.
Click the Fees tab.
Select Expense or Income from the Create list and click Go.
If your selection was Expense then enter the details as described in the Create Fee Expense Field Descriptions table.
If your selection was Income then enter Fee, Total Income Amount, Effective From, and To date. Click Apply. The Fee is created with the Fees tab highlighted on the Investor page.
Click Update.
Click Create on the Update Fee page.
Enter the details as described in the Fee Payments Field Descriptions table.
On activation of the Investor Agreement, the streams for Expense and Income Fee are created for Billing and Accrual.
Query Streams
To query the streams after activation, follow these steps:
Click Stream Details.
The expense and income fees are displayed.
Click Stream Details to view the Billed and Accrued streams.
The following table describes the fields on the Create Fee Expense page.
Field or Button | Description |
---|---|
Fee | |
Effective From | The date from which the expense fee is effective. |
Effective To | The date until which the expense fee is effective. |
Total Expense Amount | Total Expense Amount. |
Number of Periods | Number of periods. |
Amount per Period | Amount per period. |
Frequency | Frequency of the payment; Annual, Monthly, Quarterly, and Semi-Annual. |
The following table describes the fields on the Fee Payments page.
Field or Button | Description |
---|---|
Stub Days | |
Stub Amount | |
Periods | Fee payment period |
Payment Amount | Total fee payment amount |
The Terms and Conditions subtab in the Investor Agreement details page lists three seeded terms and conditions that contain values that are relevant to processing investor agreement transactions:
Buy Back
Disbursement Setup
Special Accounting
These three terms and conditions contain seeded values or values previously entered during the implementation process. For example, the formula for Buy Back is INVESTOR_BUYBACK. You can modify this formula, however, for each investor agreement.
Select an investor agreement that has not been activated.
Use the Terms and Conditions subtab on the Investor Agreement details page to complete this procedure. For field descriptions, see Terms and Conditions Field References.
Query the applicable investor agreement using the Investor Agreement page.
Click the investor agreement hyperlink in the results area. The Investor Agreement details page opens.
Click the Terms and Conditions subtab.
Click Update. The Buy Back Formula field is displayed. Click the flashlight icon next to the empty field. The Formula Name list for Oracle Lease and Finance Management is displayed. Select the appropriate formula for Buy Back. The Buy Back Formula field is displayed again, this time with the selected formula name entered in the field. If necessary, modify the formula to meet your requirements, and then click Apply.
Click Terms and Conditions again. Click Update. The required fields Payment Basis and Payment Event are displayed. Click Apply when you have made your selections.
Click Terms and Conditions again. Click Update. In the Special Accounting field, the accounting agreement code is displayed.
After you have created an investor agreement and set up the investors and their disbursements and revenue shares and fees, you are ready to activate the investor agreement.
When you activate an investor agreement, Oracle Lease and Finance Management:
Generates billing transactions for each investor with the stake recorded.
Generates streams:
Disbursement basis streams.
Income adjustment streams, on the contracts.
Present value of streams in the pool for accounting.
Investor Fees streams for expense and income fees for billing and accrual on the Investor agreement.
Generates Investor Agreement accounting:
For all templates having transaction type Investor.
For the amount to be calculated by solving the formula on each accounting template.
You must have an investor agreement set up and ready to be activated.
Perform the following steps using the Investor Agreement page:
Search the investor agreement that you want to activate and click Activate.
The top of the Activate Investor Agreement page contains read-only investor agreement information, including agreement number, description, and status.
The Validation Checklist will appear to inform you of any required steps that you may have missed in your investor agreement creation process. Go back and correct these, then return to the Investor Agreement page and click Activate again for the applicable investor agreement.
When the validation is successful, the Validation Checklist page displays the status for the investor agreement as Active.
After you have activated an investor agreement, subsequent pool transactions are displayed on the Pool Transaction page.
In addition to the investor agreement transactions described in this section, you can view pool transactions using the Pools menu. See Pool Transactions.
You must have an activated investor agreement.
Steps
Navigate to the Add Contracts page.
Select an active investor agreement number from the list and click the "+" icon in the Add Pool Contents column.
On the Add Pool Contents page, specify the Eligibility Criteria as required.
Click Submit. A concurrent process is initiated for adding the streams in the pool according to the criteria specified and the system assigns a concurrent request number.
Click Go to see the new contract.
Status: When you add a new contract, the status is New. The other statuses are Pending Approval, Approved, and Completed.
Value of Streams: Shows the total value of the stream already in the investor agreement.
Details: Shows the complete contract detail and the streams added and also displays the total value of new streams that are proposed to be added.
Cleanup: Allows you to clean up the contents of the pool that is being added by specifying the criteria. You can only clean up the contracts that are proposed to be added to the investor agreement.
Investor Stake: Allows you to update the investor stake that is to be billed to the investor.
Approve: Initiates an approval workflow for the Add contracts process.
Cancel: Lets you cancel the Add contracts request. You can only cancel the Add contracts request when the status is New or Approved.
Submit: Submits the Add contract process through a concurrent process and the status changes to Complete when the request is successful.
Use the Receivable Invoices and Payable Invoices pages to view receivable or payable invoices. Select an invoice by entering or searching by invoice number, investor agreement name or number, investor name, or the invoice date range. Then click Go.
Use the Buy Back Streams page to view buy back transactions. Perform the following:
Select the contract to be bought back and click Go.
The contract will get listed if its part of an active investor agreement.
Click on the Buy Back streams option on the contract for which you intend to do the buyback.
Select the streams that need to be bought back and click on Buyback. This initiates a process and the streams are bought back.
Select the contract to be bought back and click Go.
You can view the Buyback transaction in the Pools tab. Query for the pool to which the contract was associated. Click on the pool number and go to the transactions tab and query for the contract number.
Note: A bought back contract can be added to a new pool or to a existing active pool by using the Add contracts option also.
You must have an activated investor agreement.
Use the Loss Provisions page to create a specific loss provision for an active investor agreement.
Click Create to open the Create Specific Loss Provision page.
Enter the required fields and click Apply. See: Create Specific Loss Provision Field References.
To view accounting transaction for activation of an investor agreement, navigate to the Accounting Transactions page and search transactions by investor agreement number, transaction type, accounting status, or sources criteria.
There are two concurrent programs that you must run to process disbursements to investors. The first program is specific to investor agreements and is part of Oracle Lease and Finance Management. The second is an Oracle Payables concurrent program.
To process disbursement, perform the following steps:
In Oracle Lease and Finance Management, run the following concurrent programs: Create Investor Invoice Disbursements, Pay Invoice Prepare for AP Transfer, and Pay Invoices Transfer to AP Invoice Interface.
In Oracle Payables, run the Payables Open Interface Import Program.
For more information on disbursement processes, see Disbursements; see documentation for Oracle Payables; and see Concurrent Programs.
This section describes the process for creating investment agreements of fixed pool types.
For investor agreements of fixed pool type, you can create a pool by uploading the pool data or by using the application.
You can create a pool by uploading the pool data. The steps for uploading the pool data are:
Import pool data
Upload pool data
Override amounts and disbursement rates
Override other contents of the pool
Review pool
You can upload the pool data from an interface table in the application. You can upload the following pool data using this feature:
Action Type: This value should be New. The value New is applicable only when creating a pool.
Pool Type: This value should be Fixed.
Note: This is the only pool type supported for pool upload.
Streams: Streams that are included in syndication can be uploaded.
Syndicated amounts: Syndicated amounts, that is, disbursable amounts can be uploaded.
Disbursement dates: Disbursement dates associated to syndicated amounts can be uploaded. A disbursement date can be any day in the same calendar month of the underlying stream.
Other pool data such as residual guarantee, default dates, default percent, DFFs can also be uploaded.
After the pool is saved, it becomes eligible for selection in an Investor Agreement (IA).
All the data is entered at the contract, stream type and the calendar month level. Contract level data is prorated to assets based on relationship of asset rent to total rent for the calendar month.
You can create a pool online by using the application. The steps for creating a pool using the application are:
Create a pool.
Search and select streams.
Define syndication amounts in pools.
The following are the steps for creating an investor agreement of fixed pool type:
Create an investor pool.
Select the pool.
Select investor agreement type as Fixed.
Payment Event: When the investor agreement type is fixed, the menu option Due Date is defaulted into the investor agreement. It defines the eligibility of the disbursable amounts in a calendar month.
Payout Basis: When the investor agreement type is fixed, the menu option Due Date is defaulted into the investor agreement. You must define the day of the month on which the eligible streams are to be disbursed. Valid disbursement day values are 1 to 31.
Define additional attributes of the investor agreement. These attributes include:
Discount Rate
DFFs
Define investor.
Note: Only one investor is allowed if the pool type is Fixed.
If exceptions are required, enter them and proceed to the next step.
Note: Exceptions include Contract, Asset, Stream and Due Date.
If exceptions are not required, proceed to the next step.
Validate investor agreements
The Disbursement Elements tab in the Investor page displays syndication contents at the stream element level. You can search for syndicated amounts, that is, the disbursements elements in this tab. You can view and/or update them. Before activation, the investor elements must be validated. The following validations should also be met for fixed pool type:
The Payment Event and the Payout Basis must be Due Date.
The same billable stream element cannot be present in more than one active investor agreement.
If a contract is in an active investor agreement with pool type fixed, it cannot be in an active investor agreement with pool type percent even if the streams in the pools do not overlap.
The investor agreement of fixed pool type will be created.
Note: Flexfields in Investor Agreement pages allow users to configure additional fields they may require. Before the investor agreement is activated, you can enter exceptions for the following by overriding existing information:
Syndicated amounts
Disbursement dates
Residual Guarantee flag
After creating the investor agreement, you can initiate activation by clicking Activate. On clicking Activate, the system performs the following steps to activate the investor agreement:
Generates syndication disbursement streams
Generates syndication accrual streams
Generates secured borrowing streams
Creates syndication accounting
Generates investor stake accounting
Generates investor stake invoice
After activating the investor agreement, you can run the disbursement program. On running the disbursement program, the system performs the following steps to disburse the investor agreement:
Selects the eligible disbursement streams
Generates disbursement
The disbursement will be generated.
The disbursement process relies on the following inputs:
Disbursement Stream Amount
Disbursement Stream Date
Create Investor Invoice Disbursements Program Date
Disbursed Flag
The disbursement program selects disbursement streams that meet both the following criteria:
The disbursement stream date is on or before the Create Investor Invoice Disbursements program date.
The stream is not flagged as disbursed.
The amount disbursed is equal to the disbursement stream amount.
The following are the steps to update investor agreement:
Initiate investor agreement update
Update the investor agreement online or by upload
Online: You can enter updates online using the Update Disbursement Elements page.
Upload: You can update investor agreements through an upload with action typeModify.
Note: You can override Disbursement Amount and Disbursement Dates.
After you follow the steps to update investor agreement, the system performs the following steps to update investor agreements:
Validate investor agreements
Regenerate syndication disbursement streams
Regenerate syndication accrual streams
Create contract-level syndication accounting
The investor agreement will be updated.
After updating an investor agreement, you can regenerate streams. When streams are regenerated , all investor streams applicable to the contract are regenerated.
When you select a buyback date, the system processes a buyback for streams that meet both the following criteria:
Streams are due on or after the buyback date.
Streams were syndicated.
In the Investor Agreement pages, you can select a termination payoff formula that is used to calculate investor payoffs when a contract or asset is terminated. After the completion of the termination, the termination payoff formula in the investor agreement is invoked to calculate the amount to be disbursed to the investor. The disbursement streams due after the termination date are truncated to avoid their being processed for disbursement.
The topics in this section describe selected fields for:
Add Pool Contents
Investor Agreement
Investor Details
Investor Disbursement Details
Investor Revenue Share
Terms and Conditions
Buy Back Streams
Create Specific Loss Provision
Fields left empty or blank generate all possible values.
See Glossary for definitions of selected terms.
The following table lists and describes selected fields on this page.
Field or Button | Description |
---|---|
Credit Classification | Select the credit classification from the list. This list is displayed from Oracle Receivables. |
Pre Tax Yield | Desired pre-tax yield percent of contracts |
Book Classification | Lease contract book classification. From the list of values, select Direct Finance Lease, Operating Lease, or Sales Type Lease, only. (Any additional values in the list are for future functionality.) |
Tax Owner | Lessee or Lessor or [blank] |
Product | (Financial product.) |
Effective From | Date Range |
Effective To | Date Range |
Stream Type Subclass | Rent, Residual, or [blank] |
Streams Start Date | Date Range |
The following table lists and describes selected fields on this page.
Field or Button | Description |
---|---|
Trustee | Select a vendor to act as trustee for the investor agreement. |
Product | Select the financial product you have defined for investor agreements. |
Service Organization | Typically, Lessor |
Recourse | With recourse for investors, or without recourse for investors. |
The following table lists and describes selected fields on this page.
Field or Button | Description |
---|---|
Customer Account | Select the specific customer account set up in Oracle Receivables or TCA (Trading Community Architecture) for the selected investor. |
Bill To Address | Select from the list of values for the investor. Sourced from Oracle Receivable's customer information |
Investment Date | Date of investment by the investor. It is defaulted from the effective start date of the investor agreement and cannot be changed. |
Amount Stake | Amount paid by the investor. For example, if the investor is committing $10,000, enter 10000. |
Payout Start Date | Enter the date of the first payout to the investor. |
Payout Event | Schedule, or Processing Day |
Payout Frequency | If the Payout Event is Schedule, select Monthly, Annual, Semi-Annual, or Quarterly. |
Remittance Days | Enter number of days; for example, 5 |
The following table lists and describes selected fields on this page.
Field or Button | Description |
---|---|
Payment Method | Choose the payment method that the investor uses to make payments. |
Cash Application Rule | Choose the cash application rule that may be applied to receipts. |
Invoice Format | Summary Invoice, Detailed Invoice, or user-defined invoice format |
Review Invoice | Select the Review check box to sort the investor's invoices during printing preparation for a manual review, and not to mail the invoices directly. |
Reason for Review | Enter the reasons for the review, if applicable. |
Review until Date | Enter the date the manual invoice review ends, if applicable. |
Pay To | The application displays the vendor associated with the investor. |
Pay Site | Select from the list of values for the Pay To party. Sourced from Oracle Payables for the applicable vendor. |
Payment Terms | Select from the payment terms associated with the Pay To party. |
Payment Method | Check payment, Payment Clearing, Electronic Payment Method, Wire Payment |
Pay Group | Select from the list of values for the investor. Sourced from Oracle Payables for the applicable vendor. |
Tax Sale Benefit | Flag for your information purposes. |
Accounting Sale Benefit | Flag for your information purposes. |
Residual Guarantee | Flag for your information purposes. |
Tax Reporting | Flag for your information purposes. |
Tax Billing | Flag for your information purposes. |
Sales Tax Reporting | Flag for your information purposes. |
Sales Tax Billing | Flag for your information purposes. |
Document Number | Information that you define. |
The following table lists and describes selected fields on this page.
Field or Button | Description |
---|---|
Stream Type Subclass | Stream type subclasses are listed. |
Share Percent field for each stream type | Enter the percentage (do not include the percent sign) share for each stream type subclass. The combined shares of all the investors for each stream type subclass must not be more than 100 percent. You will receive an error message when you update if you do not observe this limit. |
The following table lists stream types purposes assigned to each stream type subclass.
Stream Type | Subclass | Description |
---|---|---|
RENT | Rent | Payment due from customer |
ADVANCED RENTALS | Rent | Future rent payments due in advance of rental term |
INTERIM RENT | Rent | Per diem rent payment charged prior to contract start date |
RESIDUAL VALUE | Residual | Amount of residual value |
PRINCIPAL PAYMENT | Loan Payment | Principal due from customer for Fixed rate loan contracts |
UNSCHEDULED PRINCIPAL PAYMENT | Loan Payment | Unscheduled Principal payment from customer for Fixed rate loan contracts |
INTEREST PAYMENT | Loan Payment | Interest due from customer for Fixed rate loan contracts |
INVESTOR CONTRACT OBLIGATION PAYABLE | Investor Disbursement | Share of rent payable to an investor |
INVESTOR RESIDUAL PAYABLE | Investor Disbursement | Share of residual payable to an investor |
INVESTOR DISBURSEMENT ADJUSTMENT | Investor Disbursement | Adjusted disbursements to an investor; for example, on a rebooked contract |
INVESTOR EVERGREEN RENT PAYABLE | Investor Disbursement Evergreen | Share of evergreen rent payable to an investor |
INVESTOR LATE FEE PAYABLE | Investor Disbursement | Late fees on share of payments payable to an investor |
INVESTOR LATE INTEREST PAYABLE | Investor Disbursement | Late interest on share of payments payable to an investor |
INVESTOR RENT BUYBACK | Investor Disbursement | Amount required to repurchase rent payments from an investor |
INVESTOR RESIDUAL BUYBACK | Investor Disbursement | Amount required to repurchase residual payments from an investor |
The following table lists and describes selected fields on this page.
Field or Button | Description |
---|---|
Formula Name | Select the formula defined to calculate the buy back amount. INVESTOR_BUYBACK is the seeded formula. |
Payment Basis | Cash Flow. |
Payment Event | Billing (1), or Receipt (2). (1) Select Billing if investors will be credited when the lessees are billed. If Billing is selected, disbursement is due to the investors when the lessee is billed. (2) Select Receipt if investors will be credited when you actually receive payment from the lessees. If Receipt is selected, disbursement is due to the investors when payment is received from the lessee. |
Special Accounting | Agreement Accounting Code. This lookup value, located on the accounting template for lease contracts, is user-defined. You can modify it on a lease contract. |
The following table describes a field on this page.
Field or Button | Description |
---|---|
Book Classification | Lease contract book classification. From the list of values, select Direct Finance Lease, Operating Lease, or Sales Type Lease, only. (Any additional values in the list are for future functionality.) |
Located on the Operations tab, Loss Provision menu, at Transactions. The following table lists and describes selected fields on this page.
Field or Button | Description |
---|---|
Operating Unit | Operating Unit assigned to the record.
Note: The list of values includes operating units assigned to the MO: Security profile. Additional Information: The application displays the selected operating unit as the default in the subsequent pages irrespective of the value that you set for the MO: Default Operating Unit profile option. The selected operating unit restricts the valid list of values in applicable fields. |
Provision Type | Select Specific loss provision type. |
Provision Date | Date the loss provision is created |
Reserve Amount | Loss provision reserve amount |
Reverse Total Reserve | Select check box to reverse the existing loss provisions. |
Tax Deductible Local | For information purposes only. (Select check box if the loss is deductible from local area taxes.) |
Tax Deductible Corporate | For information purposes only. (Select check box if the loss is deductible from corporate-level taxes.) |
The following table lists streams that are generated on lease contracts when an investor agreement is activated, for disbursement to investors:
Stream Type | Description |
---|---|
Investor Rent Disbursement Basis | Amount of rent available for disbursement to investor. |
Investor Residual Disbursement Basis | Stream is generated based on the following formula: Residual * ((1 + Agreement yield)/(1 + Contract IRR)) |
The following table lists streams that are applied for billing investor stakes:
Stream Type | Description |
---|---|
Investor Receivables | Payment due from investor |
The following table lists streams that are applied for billing and disbursement of fees:
Stream Type | Description |
---|---|
Expense Fee | Fees of Expenses to investor |
Income Fee | Fees of Income from investor |
The following table lists a stream that is applied for disbursing rent to investors during the base term:
Stream Type | Description |
---|---|
Investor Rent Payable | Rent payable to investor |
The following table lists streams that are generated on lease contracts when an investor agreement is activated, for adjustment of income:
Stream Type | Book Class | Description |
---|---|---|
Investor Rental Accrual | Operating Lease | Investor rental accrual for the rental accrual streams |
Investor Pre-Tax Income | Direct Finance Lease | Investor pre-tax income for pre-tax income streams |
Investor Pre-Tax Income | Sales Type Lease | Investor pre-tax income for pre-tax income streams |
The following table lists streams that are generated on lease contracts when an investor agreement is activated, for accounting:
Stream Type | Description |
---|---|
Present Value Securitized Rent | The present value of securitized rent payments for a contract |
Present Value Securitized Residual | The present value of securitized residual payments for a contract |
Accrued Fee Expense | Fees of expenses to investor |
Accrued Fee Income | Fees of income from investor |
SEEDED FORMULAS: Investor_Investment and Investor_Accrual are seeded formulas for Investor Investment or Investor Accrual.
SEEDED STREAM TYPE PURPOSES for accrual adjustment:
There are two seeded stream type purposes. For Direct Finance and Sales type lease contracts, the seeded stream type purpose is Investor Pre-tax Income. For Operating lease contracts, the stream type purpose Investor Rental Accrual. Streams with these stream type purposes are generated on the contract at the time of activation of the investor agreement.
When a contract is securitized, income for the contract should not be accrued to the full extent of the investor revenue share. The purpose of setting up these accounting templates is to adjust income accrual (i.e., negative accrual) for the contract.
Ensure that accounting templates are defined for Accrual transaction type for the expense and income fees in the investor product.
To generate accruals, run the Generate Accruals Master - Streams concurrent program.
Note: When the lessor and the investor have a 50/50 percent stake in the streams, and the lessor does not provide a stake up-front, do not set up the lessor as an investor. If, for example, you set up streams intending that 50% of the rent will be disbursed to the investor while the lessor will get the rest of the rental amount, or 50%, the lessor should NOT be set up as an investor. The lessor's share is assumed to be 100% minus the total revenue share of all other investors.
A common approach in syndication or securitizations is to convey title to the equipment and assign all rights under the existing equipment schedule to the investor. This is commonly referred to as True Sale or Full Sale syndication. One important feature of a full sale is that all rights in the lease and equipment pass to the investor. When a securitization transaction qualifies for a sale treatment, the asset is not recorded on the balance sheet of the lessor.
When enabling an investor agreement for Full Sale, all billable streams for any eligible contract can be added to the investor pool. Equipment asset balances (from Oracle Assets) and other asset balances, such as Unbilled Receivables and Unaccrued Income are eliminated from the balance sheet for a Full Sale. Security deposits, if any, can be included in the pool or be transferred to the investor(s) and subsidy income, if any, will be accelerated at the time of activation of the Investor Agreement.
Investor Agreements allow syndication or securitization investments in a lease or loan contract where the interest rate is linked to a reference rate or index (i.e., variable interest). Variable rate contracts can be added to pools for all types of Investor Agreements.
Investor Agreement numbers are displayed on any contract which is associated to a pool for an Investor Agreement. In cases where a contract in a pool is associated to more than one agreement, a popup window displays all Investor Agreements associated to the contract.
Assets financed on contracts included in a Full Sale pool are transferred to the transferee by changing the balancing segment values. The Oracle Assets transfer process makes this transfer and generates the transfer journal accounting entries between the two balancing segment values thereby removing the balances from the lessor assets.
Any accounting transaction for a Full Sale agreement carry a flag that enables the authoring of accounting rules to direct accounting entries to Investor Balancing Segment Values or to separate clearing accounts.
Although assets are transferred in a Full Sale investment, when the assets are returned and considered “off-lease”, a lessor may remarket a securitized asset for an Investor as an agent, but other forms of disposal such as Release or Scrapping are restricted.
Q: In order to set up an investor agreement, I have to define an investor financial product. Do I tie an accounting template set to this investor financial product?
A: The purpose of an investor product is to define accounting based on the Investor quality. It is necessary to associate an accounting template set with the investor product. The accounting template set associated with the investor product must have the following accounting templates to perform necessary accounting.
1. Investor transaction type - for accounting on activation of investor agreement
2. Billing transaction type - for billing investor stake
3. Disbursement transaction type - for periodic disbursement to investors
Q: There are two transaction types: one for syndication and one for investor. Are these transaction types strictly used for the investor portion of the agreement? Or do I add syndication transaction type to all accounting template sets with the stream types that will be changed based on the formula of the investor share?
A: The accounting templates must be defined using only the "investor" transaction type for investor agreements. Investor agreements will not recognize accounting templates with the syndication transaction type.
Q: What is the functionality of the parameters, if we have transaction types? How do these options interact with each other?
A: The accounting template is uniquely identified by a combination of transaction type, stream type, factoring and syndication flag, and memo flag. You can define different accounting templates for the same transaction type having different factoring and syndication flags and codes. This can be used to perform accounting for contracts differently based on the factoring and syndication flags and codes.
Q: There is a parameter with a list of values for factoring, syndication, and investor. If my accounting templates are set with those parameters, do all the accounting templates within that accounting template set require the same parameters?
A: It is not necessary for all accounting templates in an accounting template set to have the same parameters. But if the investor agreement is defined with an investor agreement code, accounting for that investor agreement will be done using only those accounting templates that have the specific investor agreement code.
Q: U.S. Federal Accounting Standards require that we determine whether a deal is a participation (when the lessor funds) or a true syndication (when an investor funds). How can we set up accounting templates to derive different accounting based on participation or syndication?
A: Set up and use different financial products with separate accounting template sets.