The Royal Bank of Scotland’s rolling stock leasing subsidiary, Angel Trains, is up for sale as part of the bank’s bid to raise extra cash for its proposed buyout of ABN AMRO.
Angel’s senior managers were told of the link between the proposed sale and its efforts to acquire the Dutch bank in an internal announcement made last week.
A source close to Angel’s management said at least one German bank is likely to be among the lead companies involved in the bidding process. Several German banks have entered the UK rolling stock leasing market over the past six months.
Angel will instruct Lazard, the investment bank, next week to assist with the sale, it is understood.
One source said: “Angel has been encouraging institutions close enough to the market that they should get in touch [with Angel], and [Angel] will have prepared an information memorandum.
“It will then set up a process to narrow the field to get some indicative offers out of people, and then move onto full due diligence and bid stage.”
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The move follows the Office of Rail Regulation’s (ORR) referral of the UK’s three Roscos, Angel, Porterbrook and HSBC Rail, to the Competition Commission in April this year for overcharging train operating companies by an estimated £35m to £177m a year.
As a result the roscos were accused of hiking passenger fares and the cost of government subsidies, according to the Department for Transport, as well as limiting the availability and choice of rolling stock for the franchises.
However, one senior source said: “I am not sure whether the competition commission has got very much to do with [the proposed sale of Angel], but it obviously has not made life any easier for Angel.”
Angel’s senior managers were also told last week that the recent introduction of Basel II regulations has also influenced the decision to sell.
Besides German banks, other sources said both private equity and UK banks are also interested in buying the lessor, the largest of the three UK roscos. Barclays in particular has a growing UK train lease capability.
Babcock & Brown, the Australian investment company which has a train lease joint venture company, CBRail, with Bank of Scotland, is also understood to be in the bidding process.
Angel is an attractive bid target because of its number one spot in the UK rosco market, and also as roughly 20 per cent of its capability is in Europe and the Far East.
However, it faces growing competition there, particularly from Mitsui & Co, the Japanese finance company, and also as European regional governments are increasingly giving rolling stock finance deals to local banks.
The three roscos recently lost a bid to finance the trains to be used on the new East London overground line and North London Line, due to be completed in 2010 in preparation for the 2012 Olympics. The deal was won by National Australia Bank and Sumitomo Mitsui Banking Corporation, both new players in this market.
In an unusual move earlier this year, Angel joined forces with Bombardier and Siemens in a bid to replace the UK’s high-speed train fleet. Usually bids from lessors are done separately from those put forward by manufacturers.
New entrants to the lease rolling stock sector face several barriers, particularly, according to one source, as “only the roscos have the suitably qualified engineers expected to know what they are buying”.