• funding on track to keep the roscos rolling


    by Nick Hughes, Head of Structured Solutions & Utilities, Sales & Derivatives Structuring
    and Mike Chappell, Head of Economic Infrastructure

    Rail infrastructure is set to play a central role in the UK’s economic development over the next decade and at the heart of this industry are the Rolling Stock Leasing Companies (ROSCOs).

    Formed when the UK rail industry was privatised in 1994, these three businesses own and maintain a variety of rolling stock which is leased to the train operating companies that run the services.

    ROSCOs own the majority of passenger and a large number of freight vehicles operating on the network and commit significant capital to acquire and maintain high quality assets which are demanded by operators.

    To support this continuous investment programme, the ROSCOs have been involved in six major transactions over the past couple of years and Lloyds Bank has played a key role in all of them.

    We were the only bank to have been Mandated Lead Arranger on the loan, Bookrunner on the bond and Hedge Provider on each of the six ROSCO transactions, over the last 2

    A strong bond

    The most recent of these involved Porterbrook, the Derby-headquartered business which acquired approximately one third of British Rail’s rolling stock when it was privatised.

    Over the past 17 years the firm has invested over £2 billion in acquiring 1,800 new passenger vehicles and 2,000 new freight vehicles. It has also committed over £200 million to finance the refurbishment and upgrading of its assets to ensure operators have access to a modern fleet which achieves a high standard of reliability and performance.

    Lloyds Bank first supported Porterbrook through a buyout in October 2008, a deal which saw the business acquired by an equity consortium comprising Antin Infrastructure Partners, Deutsche Bank, Lloyds Development Capital and OPTrust.

    The deal was part-funded by a nine-bank club which provided £1.5 billion of senior debt facilities on three, five and seven year terms. Lloyds Bank - Sales & Derivative Structuring team acted as Hedge Advisor and Benchmarkers to the equity providers.

    To repay some of these maturing facilities, in June 2010 the business issued two sterling bonds with a value of £520 million. Lloyds Bank acted as Bookrunner and assisted in the structuring of an additional £150 million Capex facility to support the business’ ongoing rolling stock acquisition and refurbishment programme.

    The Sales & Derivative Structuring team helped Porterbrook to realign its interest rate hedging by off-setting swap transactions – mitigating the interest rate risk on the portion of the hedging which was set against the refinanced loan.

    This close support has seen Lloyds Bank build a strong relationship with Porterbrook, so when the business looked to refinance for growth again in June 2011, the bank acted as Co-Bookrunner on a £250 million bond issuance and Mandated Lead Arranger on £650 million package of senior debt.

    Once again the team was able to offer the customer a wide spectrum of products on competitive terms and within a short timeframe.

    All aboard

    Lloyds Bank has a strong appetite to support businesses in infrastructure industry, something which is demonstrated by our position as a leading provider of specialist
    packages to support the complex funding requirements of the UK’s ROSCO sector.

    Lloyds Bank is the only bank to have played a key role in structuring all of the six transactions in the industry over the last couple of years.


    Mike Chappell, Head of Economic Infrastructure, Project Finance, said: “Rail infrastructure will be an essential driver of growth in the UK over the next decade and Porterbrook plays a central role in ensuring the system functions efficiently and effectively.

    “The continuous cycle of investment in rolling stock makes it a highly capital intensive business and one which needs an appropriate, flexible funding structure to enable it to adapt to changing market conditions.

    With this latest deal we’ve worked closely with Porterbrook to harness our broad range of financial tools to ensure it builds on its strong debt position and has the ability to continue investing in the business.”

    Paul Francis, Managing Director, Porterbrook, said: “Over the past four years, the relationship we’ve developed with Lloyds Bank has enabled us to draw on their knowledge and expertise to develop a financial structure to support our long-term growth ambitions.”

5/25/2020 12:43:21 PM