Citadel’s African rail firm gets $40m loan

Africa Railways, a platform company of Egyptian private equity and infrastructure investor Citadel Capital, has secured a $40m loan from the African Development Bank as a key subsidiary shows improved performance. This is expected to be part of a ’much bigger’ future debt package.

Africa Railways – the African rail platform company of Egyptian private equity and infrastructure investor Citadel Capital – has secured a $40 million loan from the African Development Bank (AfDB).

The loan comes on the back of the announcement that Africa Railways’ key subsidiary, Rift Valley Railways Investments (RVRI), recorded positive EBITDA of $674,000 for the first time last month.

Citadel Capital purchased an indirect stake in RVRI in December 2009. Following a shareholder restructuring in the middle of last year, it now owns a 51 percent stake in RVRI via Africa Railways.

RVRI has a 25-year concession to operate a 100-year old rail line, comprising 2,352 kilometres of track, linking the Kenyan port of Mombasa to the interiors of Kenya and Uganda, including the Ugandan capital city Kampala.

“We are very pleased with the significant progress that RVRI management has achieved both operationally and in terms of the company’s bottom line,” says Karim Sadek, managing director at Citadel Capital, in a statement.

He adds: “Throughout 2010, Citadel Capital and RVRI worked closely to implement a sustainable business plan and investment plan that includes a $287 million, five-year capital expenditure program to rehabilitate RVRI’s infrastructure and rolling stock.”

The statement says the AfDB has approved the issuance of a $40 million loan “as part of a much bigger debt package that is expected to be signed in the very near future. The debt package, along with additional equity to be injected by RVRI shareholders, will support the rehabilitation of Rift Valley Railways.

Transport prices in East Africa are, relatively speaking, among the highest prices in the world. But the statement says an efficient rail network could in time bring transport costs down by as much as 35 percent.