Hanover Equipment Trust 2001B 10-Q Quarterly report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(MARK ONE)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                    TO                    .

Commission File No. 333-75818

Hanover Equipment Trust 2001B

(Exact name of registrant as specified in its charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)	51-6523442 (I.R.S. Employer Identification No.)
c/o Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware (Address of Principal Executive Offices)	19890 (Zip Code)

(302) 651-1000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero       Accelerated filero       Non-accelerated filerþ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

As of July 30, 2007, no common equity securities of Hanover Equipment Trust 2001B (the “Registrant”) were held by non-affiliates of the Registrant. The Registrant is a special purpose Delaware business trust and its sole equity certificate holder is General Electric Capital Corporation.

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION		3
Item 1. Financial Statements		3
Condensed Balance Sheets		3
Condensed Statements of Operations		4
Condensed Statements of Cash Flows		5
Notes to Condensed Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 3. Quantitative and Qualitative Disclosures about Market Risk		15
Item 4. Controls and Procedures		15
PART II. OTHER INFORMATION		16
Item 1A. Risk Factors		16
Item 6. Exhibits		16
SIGNATURES		17
Certification Pursuant to Rule 13a-14(a)
Certification Pursuant to Section 1350

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HANOVER EQUIPMENT TRUST 2001B

CONDENSED BALANCE SHEETS
(in thousands)

	June 30,		December 31,
	2007		2006
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	—
Accounts receivable—rents		7,429		7,438
Total current assets		7,429		7,438
Rental equipment		257,750		257,750
Total assets	$	265,179	$	265,188
LIABILITIES AND CERTIFICATE HOLDER’S EQUITY
Current liabilities:
Accrued liabilities	$	48	$	54
Interest payable		7,292		7,292
Equity certificate yield payable		89		92
Total current liabilities		7,429		7,438
Notes payable		250,000		250,000
Total liabilities		257,429		257,438
Commitments and contingencies (Note 5)
Certificate holder’s equity:
Equity certificates		7,750		7,750
Accumulated trust earnings		—		—
Certificate holder’s equity		7,750		7,750
Total liabilities and certificate holder’s equity	$	265,179	$	265,188

The accompanying notes are an integral part of these condensed financial statements.

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HANOVER EQUIPMENT TRUST 2001B

CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
Rental revenue	$	5,753	$	5,752	$	11,514	$	11,492
Interest expense on rental equipment		5,469		5,469		10,938		10,938
Excess rental revenue over interest expense on rental equipment		284		283		576		554
Operating expense		16		22		43		43
Net income	$	268	$	261	$	533	$	511

The accompanying notes are an integral part of these condensed financial statements.

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HANOVER EQUIPMENT TRUST 2001B

CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

	Six Months Ended
	June 30,
	2007			2006
Cash flows from operating activities:
Net income	$	533		$	511
Changes in assets and liabilities
Accounts receivable—rents		9			11
Accrued liabilities		(6	)		(13	)
Net cash provided by operating activities		536			509
Cash flows from investing activities:
Net cash used in investing activities		—			—
Cash flows from financing activities:
Equity certificates yield paid		(536	)		(509	)
Net cash used in financing activities		(536	)		(509	)
Net change in cash and cash equivalents		—			—
Cash and cash equivalents at beginning of period		—			—
Cash and cash equivalents at end of period	$	—		$	—

The accompanying notes are an integral part of these condensed financial statements.

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HANOVER EQUIPMENT TRUST 2001B
NOTES TO CONDENSED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited condensed financial statements of Hanover Equipment Trust 2001B (the “Registrant”, “Trust”, “we”, “us” or “our”) included herein have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America are not required in these interim financial statements and have been condensed or omitted. It is the opinion of Wilmington Trust Company, not in its individual capacity but solely as the trustee of the Trust (the “Trustee”), that the information furnished includes all adjustments, consisting only of normal recurring adjustments, which are necessary to present fairly the financial position, results of operations, and cash flows of the Trust for the periods indicated. The financial statement information included herein should be read in conjunction with the financial statements and notes thereto included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2006. These interim results are not necessarily indicative of results for a full year.

Business

The Trust is a Delaware special purpose business trust which was formed in August 2001. The Trust was formed solely to: (1) issue the 8.75% senior secured notes due 2011 (the “Notes”) (see Note 3), (2) execute, deliver and perform the operating agreements to which it is a party, and (3) use the proceeds of the Notes and the related equity certificates to purchase approximately $257.8 million of natural gas compression equipment from Hanover Compression Limited Partnership (“HCLP”) and certain of its subsidiaries. The equity funding, issuance of the Notes and equipment purchase occurred on August 30, 2001. The Trust leased its natural gas compression equipment back to HCLP under a ten-year operating lease (the “Lease”). In addition to rental payments, HCLP is obligated to pay supplemental rent, costs, taxes, indemnities, and other amounts owing under the Lease. In addition, HCLP is obligated to pay the underwriting, legal, accounting and other costs of the transactions for the Trust. The assets and source of revenue available to repay the Notes and satisfy the claims of holders of the Notes are limited, as the Trust has no assets other than its interests in the equipment leased to HCLP, and no source of revenue other than the payments under the Lease and the Hanover Compressor Company (“Hanover”) and HCLP guarantees.

Proposed Merger by Hanover

On February 5, 2007, Hanover entered into an Agreement and Plan Merger with Universal Compression Holdings, Inc., a Delaware corporation (“Universal”), Exterran Holdings, Inc. (formerly known as Iliad Holdings, Inc.), a Delaware corporation and a wholly owned subsidiary of Universal (“Exterran”), and two wholly-owned subsidiaries of Exterran. If the transactions contemplated by the merger agreement are consummated, Hanover and Universal will become wholly owned subsidiaries of Exterran, and the stockholders of Hanover and Universal will become stockholders of Exterran. Although the proposed business combination is a merger of equals, it was determined that Hanover will be the acquirer for accounting purposes.

Hanover and Universal have each made customary representations, warranties and covenants in the merger agreement, including, among others, covenants to conduct their businesses in the ordinary course between the execution of the merger agreement and the consummation of the mergers and covenants not to engage in certain kinds of transactions during that period. Hanover agreed with Universal to certain exceptions to the limitations contained in these covenants, including (1) permitting us to redeem Hanover’s 7.25% Convertible Junior Subordinated Debentures due 2029 and (2) commencing on September 1, 2007, permitting us to repurchase in the open market up to $100 million aggregate principal amount of Hanover’s outstanding 4.75% Convertible Senior Notes due 2008, subject to certain limitations. In addition, Hanover and Universal have made certain additional customary covenants to one another, including, among others, covenants, subject to certain exceptions, (A) not to solicit proposals relating to alternative business combination transactions, (B) not to enter into discussions concerning, or provide confidential information

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in connection with, alternative business combination transactions, (C) to cause stockholder meetings to be held to consider approval of the mergers and the other transactions contemplated by the merger agreement and (D) for the respective Boards of Directors to recommend adoption of the merger agreement by the respective stockholders.

Investors are cautioned that the representations, warranties and covenants included in the merger agreement were made by Hanover and Universal to each other. These representations, warranties and covenants were made as of specific dates and only for purposes of the merger agreement and are subject to important exceptions and limitations, including a contractual standard of materiality different from that generally relevant to investors, and are qualified by information in confidential disclosure schedules that the parties exchanged in connection with the execution of the agreement. In addition, the representations and warranties may have been included in the merger agreement for the purpose of allocating risk between us and Universal, rather than to establish matters as facts. The merger agreement is described in Hanover’s Form 10-K for the year ended December 31, 2006, and an amendment to the merger agreement dated June 25, 2007 is described in Hanover’s Form 8-K filed June 25, 2007. The merger agreement has been filed with the SEC only to provide investors with information regarding its terms and conditions, and, except for its status as a contractual document that establishes and governs the legal relationship among the parties thereto with respect to the mergers, not to provide any other factual information regarding Hanover, Universal or Hanover’s respective businesses or the actual conduct of Hanover’s respective businesses during the pendency of the merger agreement. Investors are not third-party beneficiaries under the merger agreement and should not rely on the representations and warranties in the merger agreement as characterizations of the actual state of facts about us or Universal. Furthermore, investors should not rely on the covenants in the merger agreement as actual limitations on Hanover’s business, because Hanover may take certain actions that are either expressly permitted in the confidential disclosure letters to the merger agreement or as otherwise consented to by Universal, which consent may be given without prior notice to the public.

The proposed merger will constitute a change of control under the 2001A and 2001B equipment lease notes. Within thirty days of a change of control, the equipment trusts (with funds supplied by Hanover) must make an offer to the noteholders to purchase the notes at 101% of the outstanding principal amount of the notes and related minority interest obligations plus accrued interest to the purchase date unless the obligations of the equipment trusts have been earlier satisfied and discharged. Hanover anticipates that it will satisfy and discharge the obligations of the Trust prior to expiration of the thirty day purchase period if a change of control occurs as a result of the proposed merger. Hanover does not expect that the proposed merger will constitute a change of control under the provisions of any of its other debt obligations.

The merger agreement has been unanimously approved by both companies’ boards of directors and Exterran filed a joint proxy statement/prospectus on Form S-4 relating to the proposed merger and other annual meeting matters of each of Hanover and Universal with the Securities and Exchange Commission that was declared effective on July 10, 2007. During the second quarter, both companies received notice that the waiting period required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to their proposed merger has been terminated. Termination of the waiting period satisfies a condition to the closing of the merger. Both companies’ shareholders of record as of June 28, 2007 will be asked to vote on the proposed merger at their respective annual shareholders’ meetings on August 16, 2007. Hanover expects that the merger will proceed with a closing within the third quarter of 2007.

2. Rental Equipment

Rental equipment consists of U.S. gas compression equipment and is recorded at cost. At the time of the initial sale of the Notes, an independent appraisal firm prepared an appraisal of the rental equipment as of August 16, 2001. Due to the terms of the Lease, the current fair market value of the Trust assets and based on the above-described appraisal, management of the Trust believes that the Trust will recover the original cost of the equipment at the end of the Lease. As such, the Trust is not depreciating the rental equipment.

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3. Notes Payable

Notes payable at June 30, 2007 and December 31, 2006 consisted of the following (in thousands):

Senior Secured Notes—fixed rate of 8.75% due September 1, 2011, interest payable semi-annually on March 1 and September 1 $ 250,000

The Notes are obligations of the Trust and are collateralized by all of the equipment, rents and supplemental rents covered by the Lease. In addition, the Trust’s obligations under the Notes are jointly and severally guaranteed, unconditionally and on a senior subordinated basis, by Hanover, the ultimate parent company of HCLP, and HCLP for an amount up to 70.0% of the aggregate principal balance of the Notes outstanding, which is equal to the final rent payment under the Lease. If there is an event of default under the Lease, Hanover and HCLP guarantee, jointly and severally, on a senior subordinated basis, all of the Trust’s obligations under the Notes. Hanover unconditionally guarantees on a senior subordinated basis all of HCLP’s obligations under the Lease. The obligations of HCLP under the Lease are subordinated in right of payment to all existing and future senior indebtedness of HCLP. The obligations of Hanover and HCLP under the guarantee are subordinated in right of payment to all existing and future senior indebtedness of such guarantor. Each guarantee ranks equally in right of payment with all senior subordinated debt and senior to all subordinated debt of such guarantor. The estimated fair market value of the Notes was approximately $258 million and $260 million at June 30, 2007 and December 31, 2006, respectively.

All payments that are received by the Trust under the Lease or the guarantee will be applied first to the amounts due under the Notes. The payment of principal, premium, if any, and interest on the Notes are senior in right of payment to the payment in full of amounts due under the equity certificates.

The Trust did not have the right to redeem the Notes until September 1, 2006. After September 1, 2006, the Trust may redeem the Notes, in whole or in part, if the Trust pays the redemption prices indicated below:

	Percentage
After Sept 1, 2006		104.375	%
After Sept 1, 2007		102.917	%
After Sept 1, 2008		101.458	%
After Sept 1, 2009		100.000	%

The Trust is not affiliated with Hanover and HCLP. The indenture and participation agreement governing the Notes contain covenants that restrict the Trust’s ability to, among other things, incur liens, incur additional indebtedness, enter into any other transactions, make investments, liquidate, and engage in non-related lines of business. In addition, the indenture and participation agreement governing the Notes contain covenants that limit Hanover’s and HCLP’s ability to engage in certain activities and transactions.

4. Equity Certificates

The Trust raised approximately $7.75 million from equity certificates issued during the period from August 16, 2001 (inception) through December 31, 2001. The Trust’s equity certificates were issued to General Electric Capital Corporation (“GE Capital”). The original certificate holder assigned its interest to GE Capital and was repaid its capital contribution of $1 in August 2001. The equity certificate holder may receive a return of capital payments for its equity investment in the Trust after full payment of the Notes. The Trust will make a quarterly payment (on the first day of March, June, September, and December; the first payment was made on March 1, 2002) to equity certificate holders equal to the certificate holder yield rate (13.7% as of June 30, 2007 and December 31, 2006) multiplied by the aggregate outstanding certificate holder contributions. As of June 30, 2007 and December 31, 2006, approximately $89,000 and $92,000, respectively, was payable to the certificate holder. Equity certificate capital repayment may be made using proceeds from sale of equipment to HCLP or, on the expiration date or earlier termination of the Lease, from the proceeds from the final rent payment and the sale of equipment.

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5. Commitments and Contingencies

In the ordinary course of business the Trust may be involved in various pending or threatened legal actions. The Trust is not currently involved in any material litigation or proceeding and is not aware of any such litigation or proceeding threatened against it. The Trust has no other commitments or contingent liabilities which, in the judgment of the Trustee, would result in losses that would materially affect the Trust’s financial position, operating results or cash flows.

6. Recent Accounting Pronouncements

In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Instruments — an amendment of FASB Statements No. 133 and 140” (“SFAS 155”). SFAS 155 (a) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, (b) clarifies which interest-only strips and principal-only strips are not subject to the requirements of FASB No. 133, (c) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, (d) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and (e) amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The adoption of SFAS 155 did not have a material impact on our consolidated results of operations, cash flows or financial position.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides a single definition of fair value, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value to measure assets and liabilities. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently evaluating the provisions of SFAS 157.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Liabilities” (“SFAS 159”). SFAS 159 provided entities the one-time election to measure financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis under a fair value option. SFAS 159 is effective for financial statements as of the beginning of the first fiscal year that begins after November 15, 2007. Its provision may be applied to an earlier period only if the following conditions are met: (1) the decision to adopt is made after the issuance of FAS 159 but within 120 days after the first day of the fiscal year of adoption, and no financial statements, including footnotes, for any interim period of the adoption year have yet been issued and (2) the requirement of FAS 157 are adopted concurrently with or prior to the adoption of SFAS 159. We are currently evaluating the provisions of SFAS 159.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact contained in this report are forward-looking statements. These forward-looking statements can generally be identified as such because the context of the statement will include words such as “believes,” “anticipates,” “expects,” “estimates,” or words of similar import, although some forward-looking statements are expressed differently. Statements that describe future plans, objectives or goals of Hanover Equipment Trust 2001B (the “Registrant,” “Trust,” “we,” “us” or “our”) are also forward looking statements. You should consider these statements carefully because they describe our expectations and beliefs concerning future business conditions, our results of operations, financial position, and our business outlook or state other “forward-looking” information based on currently available information. These forward-looking statements are subject to certain risks and uncertainties applicable to the Trust. These forward–looking statements are also subject to certain risks and uncertainties applicable to Hanover Compression Limited Partnership (“HCLP”), to which we lease all of the equipment owned by the Trust, and Hanover Compressor Company (“Hanover”), the ultimate parent company of HCLP to which (along with HCLP) we look for all of the Trust’s revenue. All of these risks and uncertainties could cause actual results to differ materially from those anticipated as of the date of this report. The risks and uncertainties related to Hanover’s and HCLP’s businesses, as may be described in more detail in Hanover’s Annual Report on Form 10-K for the year ended December 31, 2006, and in subsequent filings by Hanover with the SEC, could cause our actual results to differ from those described in, or otherwise projected or implied by, the forward-looking statements set forth herein. The risks and uncertainties include:

• Hanover and HCLP operate in a highly competitive industry that includes competition among the various providers of contract compression services;

• reduced profit margins or the loss of market share resulting from competition, including pricing pressure in Hanover’s and HCLP’s businesses;

• the introduction of competing technologies by Hanover and HCLP’s competitors;

• a prolonged substantial reduction in oil and natural gas prices, which would cause a decline in the demand for HCLP’s compression and oil and natural gas production equipment;

• governmental safety, health and environmental regulations which could require Hanover and HCLP to make significant expenditures;

• currency fluctuations (in countries including but not limited to Italy, Argentina and Venezuela) and changes in interest rates;

• adverse results in litigation or regulatory proceedings to which Hanover and/or HCLP is a party;

• inability of Hanover or HCLP to comply with the financial and other covenants in or defaults under, their debt agreements and the agreements related to their compression equipment lease obligations which if not cured or waived could have a material adverse effect on Hanover and/or HCLP and the decreased financial flexibility associated with Hanover’s and HCLP’s substantial debt;

• Hanover’s and/or HCLP’s inability to implement certain business objectives including international expansion;

• Hanover’s and/or HCLP’s inability to timely and cost-effectively execute projects in international operating environments, which includes certain inherent risks in their international business activities including the following:

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• unexpected changes in regulatory requirements,

• tariffs and other trade barriers that may restrict their ability to enter into new markets,

• governmental actions that result in the deprivation of contract rights,

• changes in political and economic conditions in the countries in which they operate, including civil uprisings, riots, kidnappings and terrorist acts, particularly with respect to their operations in Nigeria,

• potentially adverse tax consequences,

• restrictions on repatriation of earnings or expropriation of property without fair compensation,

• difficulties in establishing new international offices and risks inherent in establishing new relationships in foreign countries, and

• the burden of complying with the various laws and regulations in the countries in which they operate;

• Hanover’s and/or HCLP’s ability to manage business effectively will be weakened if key personnel are lost;

• liability for acquired facilities in the past which could subject Hanover and/or HCLP to future environmental liabilities;

• Hanover’s or HCLP’s inability to generate the substantial amount of capital needed to expand their compressor rental fleet and their complimentary businesses;

• Hanover and HCLP have a substantial amount of debt, including under their compression equipment lease obligations, that could limit their ability to fund future growth and operations and increase their exposure during adverse economic conditions and as a result of having a significant amount of leverage as compared to their total capitalization which could result in a change made in their credit rating or other adverse consequences if Hanover and HCLP do not decrease their leverage;

• Hanover’s or HCLP’s inability to renew its short-term leases of equipment with its customers so as to fully recoup the cost of the equipment;

• Hanover or HCLP’s inability to generate the significant amount of cash needed to service their debt, to fund working capital and to pay their debts when they become due;

• Hanover’s or HCLP’s future ability to refinance existing or incur additional indebtedness to fund Hanover’s and HCLP’s businesses;

• losses incurred by Hanover and HCLP due to inherent risks associated with their natural gas operations, including equipment defects, malfunctions and failures and natural disasters;

• war, social unrest, terrorist attacks, and/or the responses thereto;

• Hanover’s and/or HCLP’s inability to successfully integrate acquired businesses;

• risks associated with any significant failure or malfunction of Hanover and HCLP’s enterprise resource planning system;

• Hanover’s and/or HCLP’s inability to reduce debt relative to their total capitalization;

• changes in federal bankruptcy or tax laws, comparable state laws or accounting principles; and

• Hanover’s ability to consummate the proposed merger with Universal Compression Holding, Inc.

All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. The forward-looking statements included herein are only made as of the date of this report, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

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GENERAL

The Trust is a Delaware special purpose business trust which was formed in August 2001 for the purpose of purchasing natural gas compression equipment and leasing that equipment to HCLP under an operating lease (the “Lease”). In August 2001, the Trust purchased approximately $257.8 million of gas compression equipment from HCLP and its subsidiaries to be leased back to HCLP pursuant to the Lease. The purchase was financed by the issuance of $250 million of 8.75% senior secured notes and $7.75 million in equity investment from the Trust’s equity certificate holder.

In February 2003, the Trust completed a registered offering pursuant to a registration statement on Form S-4 to exchange its 8.75% senior secured notes due 2011 (the “new notes”) for all of its outstanding 8.75% senior secured notes due 2011 (the “old notes”). Pursuant to the exchange offer, holders of the old notes received $1,000 principal amount of applicable new notes for each $1,000 principal amount of old notes exchanged. The terms of the new notes are identical to the terms of the applicable old notes except that the new notes are freely transferable under the Securities Act of 1933 and do not have any exchange or registration rights. In March 2003 the exchange offer was completed and all of the old notes were exchanged for new notes. References to the “Notes” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations mean the old notes and the new notes, collectively.

The assets and source of revenue available to repay the Notes and satisfy the claims of holders of the Notes are limited, as the Trust has no assets other than its interests in the equipment leased to HCLP, and no source of revenue other than the payments under the Lease and the Hanover and HCLP guarantees. The Notes are obligations of the Trust only, and are not obligations of Hanover, HCLP or the Trustee. The Trust has no officers, directors or employees. The Trustee relies on receiving accurate information, reports and other representations from Hanover and HCLP in the ordinary course of its duties as Trustee. For information about Hanover and HCLP, the holders of the Notes are directed to Hanover’s Annual Report on Form 10-K and other reports and information that Hanover or HCLP has filed, or will file, with the SEC under the Securities Exchange Act of 1934. In executing and submitting this report on behalf of the Trust and with respect to David A. Vanaskey, Jr. in executing the Certifications relating to this report, the Trustee and David A. Vanaskey, Jr. have relied upon the accuracy of such reports, information and representations of Hanover and HCLP.

Proposed Merger by Hanover

As discussed in Note 1 to the Consolidated Financial Statements, “Basis of Presentation – Proposed Merger by Hanover,” on February 5, 2007, Hanover and Universal announced they entered into a definitive merger agreement. The merger agreement has been unanimously approved by both companies’ Boards of Directors and Hanover remains optimistic that the merger will proceed and expects a closing within the third quarter of 2007. Completion of the merger is subject to certain conditions that are set forth in the merger agreement, including the approval of shareholders of both companies. For more information regarding the proposed merger and the terms of the merger agreement, please see Note 1 to the Consolidated Financial Statements.

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RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2007 COMPARED TO THREE MONTHS ENDED JUNE 30, 2006

Revenues

The Trust’s rental revenues increased to $5,753,000 during the three months ended June 30, 2007 from $5,752,000 during the three months ended June 30, 2006. The Trust’s rental revenue is based primarily on the interest accrued on the Notes and the yield payable to the equity certificate holder. The interest rate on the Notes is fixed at 8.75% and the amount of interest accrued was $5,469,000 for the three months ended June 30, 2007 and June 30, 2006. The yield to the equity certificate holder was $268,000 for the three months ended June 30, 2007 and $261,000 for the three months ended June 30, 2006. The yield payable on the equity certificates will vary depending upon the certificate holder yield rate (13.7% as of June 30, 2007 and 13.5% as of June 30, 2006). Return on the equity certificates accrues at the Eurodollar rate or, in certain circumstances, the prime rate, plus a spread in each case of 8.375% per year.

In addition, the Trust received additional rents to reimburse it, as required under the Lease, for its operating expenses. These additional rents amounted to $16,000 for the three months ended June 30, 2007 and $22,000 for the three months ended June 30, 2006.

Expenses

Operating expenses decreased by $6,000 or approximately 27% to $16,000 during the three months ended June 30, 2007 from $22,000 during the three months ended June 30, 2006. The decrease resulted from lower professional fees during the three months ended June 30, 2007 as compared to the three months ended June 30, 2006.

SIX MONTHS ENDED JUNE 30, 2007 COMPARED TO SIX MONTHS ENDED JUNE 30, 2006

Revenues

The Trust’s rental revenues increased by $22,000 to $11,514,000 during the six months ended June 30, 2007 from $11,492,000 during the six months ended June 30, 2006. The Trust’s rental revenue is based primarily on the interest accrued on the Notes and the yield payable to the equity certificate holder. The interest rate on the Notes is fixed at 8.75% and the amount of interest accrued was $10,938,000 for the six months ended June 30, 2007 and June 30, 2006. The yield to the equity certificate holder was $533,000 for the six months ended June 30, 2007 and $511,000 for the six months ended June 30, 2006. The yield payable on the equity certificates will vary depending upon the certificate holder yield rate (13.7% as of June 30, 2007 and 13.5% as of June 30, 2006). Return on the equity certificates accrues at the Eurodollar rate or, in certain circumstances, the prime rate, plus a spread in each case of 8.375% per year. In addition, the Trust received additional rents to reimburse it, as required under the Lease, for its operating expenses. These additional rents amounted to $43,000 for the six months ended June 30, 2007 and June 30, 2006.

Expenses

Operating expenses remained flat at $43,000 during the six months ended June 30, 2007 as compared to the six months ended June 30, 2006.

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LIQUIDITY AND CAPITAL RESOURCES

Under the terms of the Lease, all of the costs of maintaining and financing the leased equipment are borne by HCLP, as the lessee. The Trust believes that it has adequate capital resources for the nature of its business and that the funds provided by operations will be sufficient to satisfy its obligations. Because the Trust is limiting activities to the ownership, financing and leasing of equipment under the Lease, the Trust does not believe it will have any need to obtain additional debt or equity financing for its current operations.

The Trust’s cash and cash equivalents balance at June 30, 2007 and December 31, 2006 was $0. Operating activities for the six months ended June 30, 2007 provided $536,000, which was used for the payment of the equity certificates yield due.

The Notes are obligations of the Trust and are collateralized by all of the equipment, rents and supplemental rents covered by the Lease. In addition, the Trust’s obligations under the Notes are jointly and severally guaranteed, unconditionally and on a senior subordinated basis, by Hanover, the ultimate parent company of HCLP, and HCLP for an amount up to 70.0% of the aggregate principal balance of Notes outstanding, which is equal to the final rent payment under the Lease. If there is an event of default under the Lease, Hanover and HCLP guarantee, jointly and severally, on a senior subordinated basis, all of the Trust’s obligations under the Notes. Hanover unconditionally guarantees on a senior subordinated basis all of HCLP’s obligations under the Lease. The obligations of HCLP under the Lease are subordinated in right of payment to all existing and future senior indebtedness of HCLP. The obligations of Hanover and HCLP under the guarantee are subordinated in right of payment to all existing and future senior indebtedness of such guarantor. Each guarantee ranks equally in right of payment with all senior subordinated debt and senior to all subordinated debt of such guarantor. The estimated fair market value of the Notes was approximately $258 million and $260 million at June 30, 2007 and December 31, 2006, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Instruments — an amendment of FASB Statements No. 133 and 140” (“SFAS 155”). SFAS 155 (a) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, (b) clarifies which interest-only strips and principal-only strips are not subject to the requirements of FASB No. 133, (c) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, (d) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and (e) amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The adoption of SFAS 155 did not have a material impact on our consolidated results of operations, cash flows or financial position.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides a single definition of fair value, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value to measure assets and liabilities. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently evaluating the provisions of SFAS 157.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Liabilities” (“SFAS 159”). SFAS 159 provided entities the one-time election to measure financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis under a fair value option. SFAS 159 is effective for financial statements as of the beginning of the first fiscal year that begins after November 15, 2007. Its provision may be applied to an earlier period only if the following conditions are met: (1) the decision to adopt is made after the

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issuance of FAS 159 but within 120 days after the first day of the fiscal year of adoption, and no financial statements, including footnotes, for any interim period of the adoption year have yet been issued and (2) the requirement of FAS 157 are adopted concurrently with or prior to the adoption of SFAS 159. We are currently evaluating the provisions of SFAS 159.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not Applicable

Item 4. Controls and Procedures

Changes in Internal Control over Financial Reporting

There was no change in the Trust’s internal control over financial reporting during the second quarter of fiscal 2007 that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

The Trustee evaluated the effectiveness of the Trust’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of June 30, 2007. Based on the evaluation, the Trustee concluded that the Trust’s disclosure controls and procedures were effective to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to management and is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. The Trustee, in making these determinations, has relied to the extent reasonable on information provided by Hanover and HCLP.

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PART II. OTHER INFORMATION

Item 1A. Risk Factors

There have been no material changes in our risk factors that were previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2006.

Item 6: Exhibits

(a) Exhibits

31.1	Certification pursuant to Rule 13a-14(a)/ 15d-14(a) of the Securities Exchange Act of 1934. *
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002. **

*	Filed herewith.
**	Furnished herewith.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 13, 2007

Hanover Equipment Trust 2001B
By: Wilmington Trust Company,
not in its individual capacity but
solely as Trustee for the Hanover
Equipment Trust 2001B

/s/ DAVID A. VANASKEY, JR.
Name:	David A. Vanaskey, Jr.
Title:	Vice President

Note: Because the Registrant is a trust without officers, directors or employees, only the signature of an officer of the trustee of the registrant is available and has been provided.

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EXHIBIT INDEX

31.1	Certification pursuant to Rule 13a-14(a)/ 15d-14(a) of the Securities Exchange Act of 1934. *
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

*	Filed herewith.
**	Furnished herewith.

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