On the right track

For owners of UK rolling stock leasing companies (ROSCOs), the bond market appears to be all the rage – not surprising, perhaps, as appetite for issues grows and the pricing environment continues to improve.

Angel Trains: part of a
drift to bond market  

In recent conversation with Infrastructure Investor, Arcus Infrastructure Partners’ founding partner Simon Gray confirmed media reports that the firm was seeking a refinancing for part of the debt facility that was used to acquire Angel Trains, the UK’s largest ROSCO, in August 2008 – a £3.6 billion (€4.2 billion; $5.5 billion) deal executed by a consortium that included Arcus predecessor, the Babcock & Brown European Infrastructure Fund.
“The first debt maturity is in mid 2011,” says Gray. “We began looking at opportunities to refinance that tranche at the end of last year and we are making very good progress.”

Porterbrook is another UK ROSCO expected to come to market shortly. The firm is seeking to take out part of the £1.5 billion acquisition debt associated with the October 2008 £2 billion deal led by Paris-based infrastructure fund manager Antin Infrastructure Partners together with banking groups Deutsche Bank and Lloyds TSB.  

Media reports have suggested that Porterbrook was originally planning a £350 million refinancing deal, but has since raised its expectations to £500 million and possibly as much as £700 million.

Furthermore, the planned £2 billion sale of HSBC Rail comes with a staple financing package including bonds as well as loans.

Asked why Angel Trains and ROSCOs in general are currently gravitating to the bond markets, Gray says:  

“Lenders are very positive about ROSCOs and Angel is in a particularly strong position to raise finance. However, the bank market is not a provider of long-term finance today, despite coming back compared to this time last year. Liquidity is available but tenors remain shorter than we would like for a company with long-term assets like Angel.”

He adds: “There has been a drift to the bond market for longer-dated liabilities and Angel is in the good position of being investment grade-rated, strong, stable and long term. So we are in the right place at the right time.”