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November 8, 2010updated 12 Apr 2017 4:18pm

HSBC quits train leasing

HSBC has agreed to sell its train leasing business for £2.1bn (2.4bn) to a private equity consortium formed of STAR Capital Partners, 3i Infrastructure and Morgan Stanley Infrastructure Partners. Eversholt owns a third of the UKs rolling stock, and derives its revenue primarily from long-term lease payments. Paul Gough, partner at STAR Capital, said: STARs investment in Eversholt reflects our strategy of supporting capital intensive businesses with strong cash flow visibility and downside protection

By Antonio Fabrizio

HSBC Asset Finance has become the last of three banks to exit the rolling stock leasing business with the sale of Eversholt Rail Group to a private equity consortium.

RBS sold Angel Trains and Abbey disposed of Porterbrook, also to private equity buyers, in 2008.

The three rolling stock companies, formed after privatisation of British Rail in the mid-1990s, lost their attraction for the banks which have re-focused on core operations since the financial crisis.

Tony Mallin, CEO of consortium member STAR Capital, and a former FLA and Leaseurope chairman, said that UK rail leasing would be enlivened by the acquisition.

 “The UK train leasing sector will become more dynamic now. Eversholt is in the hands of a business like ours, which wants to invest capital. We are looking to expand, to invest in new trains and in the existing fleet to extend its life. We have capital available to invest, which will be good for the future value of the assets and for lessees,” he said.

HSBC raised £2.1 billion for Eversholt, from a consortium formed of STAR Capital Partners, 3i Infrastructure and Morgan Stanley Infrastructure Partners. The investors will take equal stakes in the business and are funding the acquisition through a combination of equity and debt.

Mallin claimed that banks may not have been best placed to operate train lessors in the first place. “I have always thought it is not a sensible place for a business like this with operating leased assets to sit on a bank’s balance sheet.”

Tammy Samuel, a partner in law firm SNR Denton’s transport and infrastructure division, agreed that the new owners were likely to be more proactive than the banks had been. She said: “The shrinking of business opportunities and the financial crisis meant that banks decided rolling stock was not going to be a core part of their business. They have gradually exited this market as it has become less attractive. New owners who want to grow the business will probably look to re-enter the new rolling stock procurement market, which could be an exciting development for the whole market.”

The full version of this article will appear in Leasing Life’s December edition. To subscribe to Leasing Life, click here.

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