rail leasing despite ever-thinning margins.
The French banks continue to be strong players in the asset
finance market for aircraft and shipping deals, but when it comes
to securing mandates in the rail finance market they are finding
the going just as tough as banks across Europe.
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The French tax lease has been used for a number of
municipalities and regions in France in recent years and a number
of tenders are in the market at present.
The respective governments of Région Alsace and Région Centre as
well as the municipalities of Ville de Grenoble and Ville d’Orléans
are all talking to banks to fund new rolling stock
acquisitions.
“These deals are a bit different from mainstream assets such as
shipping vessels and aircraft,” said Patrick de Chambure, head of
tax lease and financial engineering at Crédit Industriel et
Commercial in Paris.
“French municipalities are taking fewer risks compared with
shipping and airline companies. I think the municipalities are
depriving themselves of deal opportunities available to them,” he
added.
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By GlobalData“Some players are doing these deals, but I do not think the
deals will be opened up to all French banks.”
Though no-one in the French asset finance market is predicting
that rail operators will cease using French leases, the ongoing
turmoil in the financial markets is impacting on deals.
“The French lease is still an active market offered by the
French banks,” said Yves Lallemand, deputy global head of
infrastructure and asset-based finance at Société Générale
Corporate and Investment Banking (SGCIB) in Paris.
“There are around five rail transactions a year for French
regions replacing their regional train fleets. Some of those
regions also do straight-debt deals.
“The pricing hike is not massive but the issue is very sensitive
because public borrowers have become very used to very thin
margins,” Lallemand added.
While rail might be less risky compared with the cyclical
airline and shipping industries, the lease terms required for
French leases to be economically interesting are just too
challenging for some banks.
An asset finance source in France said structuring deals over
15-18 years, or even longer, is akin to “gambling” for French banks
uncertain of being able to generate taxable benefits over such a
long period.
Aircraft, container and shipping deals tend to require much
shorter lease terms of 10-12 years, by comparison.
‘Innovative’ financing
Public sector bank Dexia has carved out a niche in providing
what it calls “innovative” financing for train procurement
programmes in France.
The southern French region of Languedoc-Roussillon and Dexia
signed a €128.2 million crédit-bail (lease finance) deal earlier
this year. The delivery of 25 cars – 20 ZGC electric and five BGC
diesel-electric cars – will be delivered during 2009.
Given that public procurement bodies want to secure the most
competitive financing available in the market, the French lease is
almost becoming a loss-leader for banks, market participants
said.
The pricing on long-term rail financing is so thin the only way
that banks signing these deals can make any money is in the hope of
being awarded other treasury functions by the municipalities and
regions in France.
However, other French banks have embraced rail finance as a core
part of their business. Calyon, part of the Crédit Agricole group,
announced to the market in mid-September that rail finance would
still feature as part of the investment bank’s structured finance
offering.
SGCIB has confirmed that its rail finance strategy will compete
with the likes of Railpool, the HSH Nordbank/ KfW joint venture, as
well as other lessors active in continental Europe.
“We have set up a dedicated team to pursue the same objective as
Railpool: frankly, we are in competition with the German
joint-venture and other European rail leasing companies like Angel
Trains and CB Rail,” said Lallemand.
But demand in the French market is still limited as majors like
SNCF and its subsidiaries tend to finance at a corporate funding
level rather than on an asset finance basis.
“Demand for asset finance from passenger rail incumbents is not
material,” said Lallemand. “We do expect there will be more
interest in products from the private freight market in Europe and
also gradually from incumbents’ freight divisions.”
Germany looks set to offer some of the more interesting
opportunities, he said. SGCIB is seeking operating lease deals in
the German market with new operators.
“A number of private operators have entered the market over the
past few years and have been looking for regional train finance on
a pure operating lease basis, which typically have an 8-13 year
maturity and are structured as dry leases without maintenance
provision,” said Lallemand.
It could be too early, however, to predict large UK projects
being financed by French banks, but that is not for the want of
trying. Sources indicated the French banks are keen to take a role
in the Thameslink and IEP projects across La Manche.
On the UK market, Lallemand commented: “It is very difficult to
enter the UK market because it is dominated by a few players. We
are looking at upcoming programmes, not just on a pure operating
lease basis but also from an infrastructure finance perspective
too.”
Anthony O’Connor
