National Railroad Passenger Corporation (“Amtrak”): Acela Financing

Case Solution

Robert F. Bruner, Jessica Chan
Darden School of Business ()

In the late 1990s, the National Rail Passenger Corporation (Amtrak) had a rude awakening when Congress ruled that it must end its reliance on federal subsidies by 2002. In response, Amtrak created a self-sufficiency plan that focused on a new high-speed passenger train that was expected to generate enough revenue to make Amtrak self-sufficient by 2002. To operate this new service, Amtrak had to purchase $ 750 million in new locomotives and train sets in 1999. Three alternatives were available to finance the purchase: debt financing, lease financing or relying on federal sources. The case begins with Amtrak’s CFO instructing his employees in April 1999 to consider a leveraged lease proposal just filed by BNY Capital Funding LLC. The objective of the procedure is to introduce students to financial leasing as a financing alternative, to discuss the decision between financial leasing and purchase, as well as the conditions under which financial leasing contracts make sense, and to acquire knowledge in the valuation of leases. financial

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