LLOYDS BANK COMMERCIAL BANKING ON A ROLL WITH THIRD ROSCO DEAL IN 2010

The UK Rail Infrastructure sector has been a hotbed of transaction activity in 2010, with each of the three rolling stock companies (ROSCOs) undertaking transactions with a combined value of over £3.5 billion.

Following the bond refinancing of Porterbrook in June and Angel Trains in July, Eversholt Rail Group was acquired by a consortium of infrastructure investors in November.

A common thread running throughout is the central role Lloyds Bank Commercial Banking has played in developing comprehensive debt funding packages for all three deals. We are one of the only banks to have been involved in all five major ROSCO transactions over the past three years.

 

The hat-trick

Eversholt Rail Group, formerly HSBC Rail Limited, is one of the three major rolling stock companies (ROSCOs) in the UK which were created in 1994 through the privatisation of British Rail.

The firm owns and manages a fleet of over 4,000 vehicles and provides various services to the passenger and freight markets including operating leases, procurement, refurbishment, engineering support and maintenance improvements.

The two other ROSCOs had been the subject of acquisitions over the last three years and when Eversholt Rail Group’s parent company decided to dispose of the asset, a group of leading infrastructure investors developed a consortium to secure the deal.

 

Running on rails

In November 2010, Eversholt Investment Group (EIG) successfully agreed to buy the business in a deal which valued Eversholt Rail Group’s gross assets at approximately £2.1 billion.

The EIG consortium comprises funds managed by 3i Infrastructure plc, Morgan Stanley Infrastructure Partners and STAR Capital Partners, with each member taking an equal stake in the business.

Lloyds Bank Commercial Banking played a central role in putting together the accompanying £1.7 billion package of senior facilities which enabled EIG to complete the transaction, drawing on various disciplines and specialisms to deliver the most appropriate package.

 

A group effort

The Project Finance team acted as Mandated Lead Arranger and Book Runner on £1 billion of acquisition, capex and working capital facilitates as well as providing a £26.5 million cash- backed Letter of Credit to support existing commitments.

Our Debt Capital markets division acted as Joint Lead Manager role on a £700 million two-part sterling-denominated bond issue (a position which Lloyds Bank took in the 2010 refinancings of both Angel Trains and Porterbrook) and provided certainty in a volatile market by offering a ‘bridge to bond’.

Lloyds Bank was also able to draw on the specialist knowledge of our Rail Finance team to corroborate transaction assumptions and ensure the credit approval process was completed as quickly as possible.

Our Sales & Derivative Structuring division worked closely with the vendor and acquirer to develop a hedging strategy for the transaction while the Loan Syndication team ensured the deal was structured and priced “on-market”.  

 

Viewpoints

Neil King, Partner in the Infrastructure team at 3i Investments plc, Investment Adviser to 3i Infrastructure plc, said: “We are delighted to be acquiring Eversholt.  Its strong market share, well-diversified customer base and high quality cash flows from leases contracted over the medium to long term make this an attractive asset with strong infrastructure characteristics.

Lloyds Bank played a key role in this transaction.  We were able to draw on a broad range of disciplines and expertise from within the Group to ensure the debt funding package and associated facilities will allow us to deliver the full potential of the Eversholt business.”
 
Mike Chappell, Head of Economic Infrastructure, Project Finance, Lloyds Bank, said: “ROSCOs are crucial cogs in the UK’s rail infrastructure and with reliable source of revenues; they continue to be attractive targets for investors.

“In EIG, Eversholt Rail Group has the backing of a consortium with the infrastructure expertise and financial firepower to further develop its portfolio as well as continuing to grow the business and capture market share.

“Lloyds Bank  is actively engaged in the UK rail infrastructure market which is reflected in the key roles we’ve played in all of the major transactions involving ROSCOs.

“This deal with Eversholt Rail Group is a great example on how we can draw on the Group’s strengths to seamlessly deliver the expertise and tailored facilities required to structure deals that meet the needs of all stakeholders.”

 

Contact details:

Mike Chappell
Head of Economic Infrastructure, Project Finance, Lloyds Bank Commercial Banking
+44 (0)207 158 2760
mike.chappell@lloydsbanking.com