Equipment leasing investment company ATEL Capital Group is ready to launch the latest iteration of its equity fund, ATEL Capital Equipment Fund XI, according to a recent S-1 filing with the Securities and Exchange Commission.

The vehicle, similar in nature to the previous funds in the series, will be used to acquire equipment, which in turn, will be leased out. Eventually, the leasing receivables would likely be securitized, the filing stated. The fund aims to purchase a diverse portfolio of low-technology equipment leased to corporations.

The initial offering is for a total of 15 million units of LLC interest for a price of $10 per share. No units will be sold unless a minimum of $1.2 million in cash is received within one year from the start of the offering, the filing said. Roughly 87% of the capital raised will be used for equipment investment purchases. At least an additional one-half of one percent of the fund's initial capital will be held as capital reserves. Of the remaining capital, nine percent will be used to pay selling commissions and up to 3.5% will be used to pay other offering and organization expenses.

In the interest of diversity, the manager intends to limit the amount invested in equipment leased to any single corporation to no more than 20% of the aggregate purchase price of equipment owned at any time during the reinvestment period. Furthermore, the fund's equity investment in equipment leased to a single lessee will be capped at 20% of the maximum capital from the sale of units.

The manager intends to lease at least 75% of the equipment (by cost) to lessees that the manager deems to be a high-quality corporate credit. At least half of ATEL's corporate lessee exposure will be investment-grade or higher from Moody's Investors Service, or the credit equivalent as determined by the manager.

The remaining 25% of the initial portfolio may include one or more of what are described in the filing as growth capital leasing investments. ATEL, "will look for those companies that show solid potential for consistent profitability within a specific time period, and that have obtained or are expected to attract sufficient equity venture capital to finance their operations through expected profitability," the filing states.

In the past, ATEL has placed several transactions, averaging $150 million each, into ABCP conduits. The extent of the company's participation in the term ABS market is currently unclear, although company officials have expressed an interest in bringing a term deal to market, given favorable economics. Phone calls requesting comment were not returned at press time.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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