EBRD Raises USD200 mn for Russian Brunswick Rail Group
OREANDA-NEWS. July 22, 2010. The EBRD has raised USD 200 million, including USD 100 million through a heavily oversubscribed syndicated loan, for Russia’s Brunswick Rail Group, reported the press-centre of EBRD.
The funds will be used to finance the purchase of over 5,000 new railcars, primarily gondolas, to help meet growing demand as the Russian rail freight market recovers from the dramatic fall it suffered in 2008-2009.
Another international financial institution is in advanced negotiations to raise an additional USD 100 million for the same project in conjunction with the EBRD loan, including USD 50 million for syndication to commercial banks.
This EBRD transaction brings the Bank’s total investments in 10 railway and associated projects in Russia to nearly USD 1.4 billion since the government in 2001 launched a structural reform of the sector aimed at liberalising the network and encourage private sector investment, said Sue Barrett, Director of the EBRD Transport Team.
It underlines the EBRD’s commitment to foster competition and increase the role of the private sector in a transport system that is vital to the health of the Russian economy, Sue Barrett added.
The EBRD funding will enable this private sector group to undertake a major fleet investment programme aiming to take advantage of a growing trend among local industrial companies and rail freight operators to switch from owning rolling stock to leasing it under operating leases, an area in which Brunswick is a leading specialist.
The group, which currently owns over 12,500 railcars, is one of the leading Russian privately owned providers of rolling stock, principally gondolas, under operating leases.
Operating leases enable corporate clients to increase transport capacity without adding debt to their balance sheets or using cash to acquire non-core assets. The funds thus freed up can instead be invested in core products and activities.
Only seven percent of Russia’s fleet of one million railcars are currently used under operating leases. The corresponding portion in the United States and Europe is over 30 percent. This fast-growing segment is forecast to expand at a greater rate than the overall market as customers increasingly make use of operating leases to fund their fleet expansion.
The EBRD is the lender of record for the full USD 200 million under an EBRD A/B loan structure, and has used its own funds to provide an eight-year A loan of USD 100 million.
The five-year B loan of USD 100 million was syndicated to a group of five commercial banks. This part of the transaction, one of the first transport sector syndications in the EBRD region this year, was heavily over-subscribed.
UniCredit Bank AG and Societe Generale have joined the transaction as Mandated Lead Arrangers and Bookrunners, while Raiffeisen Zentralbank Osterreich AG and ING Bank N.V. are acting as Lead Arrangers and KfW Ipex-Bank GmbH is Lead Manager.
The borrower is “Brunswick Wagon Leasing Limited”, a member of the Brunswick Rail Group and incorporated in the Russian Federation.
Russian rail freight market volumes dropped 19 percent in 2009.
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