Amtrak 2015 Annual Report Download - page 29

National Railroad Passenger Corporation and Subsidiaries (Amtrak)
Notes to Consolidated Financial Statements (continued)
6. Mortgages and Debt (continued)
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of and for the year ended September 30, 2014. Waivers were received from certain lenders where necessary
to prevent a default and upon delivery of the audited financial statements for the year ended September 30,
2014 on October 1, 2015, the Company came into compliance with its financial reporting covenant obligation.
However, in January 2016, the Company failed to meet its covenant obligation to provide on a timely basis
its audited financial statements as of and for the year ended September 30, 2015. Waivers were received from
certain lenders where necessary to prevent a default, and upon delivery of these audited financial statements,
the Company will have satisfied all of its financial reporting covenant obligations.
7. Leasing Arrangements
Amtrak leases equipment, primarily passenger cars and locomotives, and related maintenance infrastructure
under capital leasing arrangements. Amtrak has entered into various lease transactions in which the lease
structure contains variable interest entities (VIEs). These VIEs were created solely for the purpose of doing
lease transactions and have no other activities, assets or liabilities outside of the lease transactions. In some
of the arrangements, Amtrak has the option to purchase some or all of the assets at a fixed price, thereby
creating variable interests for Amtrak in the VIEs.
Amtrak maintains and operates the assets based on contractual obligations within the lease arrangements,
which set specific guidelines consistent with industry standards. As such, Amtrak has no control over activities
that could materially impact the fair value of the leased assets. Amtrak does not hold the power to direct the
activities of the VIEs and, therefore, does not control the ongoing activities that have a significant impact on
the economic performance of the VIEs. Additionally, Amtrak does not have the obligation to absorb losses,
or the right to receive benefits of the VIEs.
As of September 30, 2015 and 2014, the gross amount of assets recorded under capital leases was $1.7 billion
and $1.4 billion, respectively, with accumulated amortization of $0.8 billion and $0.7 billion, respectively.
Amtrak is subject to various covenants and restrictions under its leasing arrangements. Amtrak has given
guarantees or entered into reimbursement agreements in connection with certain of these lease transactions.
A default by Amtrak or acceleration of Amtrak’s indebtedness may result in cross-default to other Amtrak
indebtedness, and may have a material adverse effect on the Company (see Note 6).
RRIF Loan
As of September 30, 2015, 51 of the 70 planned new electric locomotives were delivered to the Amtrak
Equipment Trust 2011 (Trust) for the RRIF loan and leased to Amtrak. The Trustee of such Trust maintains
title to the locomotives and administers the RRIF loan.
The delivery of each locomotive creates a capital lease for accounting purposes between the Company and
the Trustee. As of September 30, 2015 and September 30, 2014, $358.2 million and $149.7 million,
respectively, of the amount due under the RRIF loan was attributable to locomotives leased under the Trust
and is recorded, net of unamortized discounts applied to the capital lease obligation of $14.7 million as of
September 30, 2015 and $6.3 million as of September 30, 2014, as a capital lease obligation. See additional
disclosure regarding the RRIF loan in Note 6.