Deals

UK train leasing firms set to tap bond markets

Arcus Infrastructure Partners reports “very good progress” with its refinancing of portfolio company Angel Trains as three UK rolling stock firms look to take advantage of bond market enthusiasm.

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The UK rolling stock leasing company (ROSCO) sector appears to be providing evidence of growing appetite for infrastructure-related issues in the bond market.  

In the May issue of Infrastructure Investor (see related item, top right), Simon Gray, founding partner of London-based fund manager Arcus Infrastructure Partners, confirmed that Arcus was “making progress” with the refinancing of Angel Trains – which is expected to tap the bond market.   

“We acquired Angel Trains, the largest ROSCO, in August 2008 and the first debt maturity is in mid-2011,” said Gray. “We began looking at opportunities to refinance that tranche at the end of last year and we are making very good progress.”

Gray added: “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. 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.”

Fellow UK-based ROSCO Porterbrook, which was acquired by a group led by Paris-based fund manager Antin Infrastructure Partners for £2 billion (€2.3 billion; $3.0 billion) in October 2008, was recently reported to be coming to the bond market to take out part of a £1.5 billion acquisition financing associated with the deal. According to reports, this deal was originally expected to be sized at £350 million, but may now reach as much as £700 million.

Meanwhile, the planned £2 billion sale of a third ROSCO, HSBC Rail, includes a staple debt package comprising a £1.2 billion loan and a £500 million 15- to 20-year bond. In mid-April, it was reported that a consortium comprising 3i, Morgan Stanley and Star Capital had emerged as the frontrunner in the auction for HSBC Rail.