The European Union is expected to sign up to the Luxembourg Rail
Protocol as early as 2009, heralding a boost for asset-based rail
industry financings in the region. EU member states will likely
follow suit by signing-up and ratifying the agreement during 2009
and 2010.
“Following a diplomatic delay between Spain and the UK over
Gibraltar, the Aviation Protocol to the Cape Town Convention on
moveable assets is expected to be adopted by the EU this year. The
Luxembourg Rail Protocol is also expected to be signed by the EU
either in 2009 or shortly thereafter,” said Howard Rosen, chairman
of the Rail Working Group in Zug, Switzerland.
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“Once the EU has signed off, it will give a huge impetus for EU
member states.”
“What will happen over the next 18-24 months, as the Cape Town
Convention on aviation assets comes into play in the EU, is that
banks and practitioners will become used to the framework and this
will filter through to rolling stock financings, too,” Rosen
added.
“The rail industry has to take the responsibility and place
pressure on governments to sign up to the Protocol.”
The Luxembourg Rail Protocol is part of the regime established
by the 2001 Cape Town Convention on International Interests in
Mobile Equipment to provide for an internationally recognised
interest in railway rolling stock.
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By GlobalDataThe Rail Protocol was established in February 2007 at a
conference in Luxembourg attended by government delegations from 42
countries. At that conference, Gabon, Italy, Luxembourg and
Switzerland signed up to the protocol.
Going forward, the Luxembourg Rail Protocol could impact on the
next wave of rolling stock procurement, particularly in developed
rail finance markets such as the UK.
“What the UK Treasury should really be saying in light of the
recent findings of the Competition Commission is that financing of
rolling stock through public funds is neither necessary nor
desirable,” said Rosen.
“The Luxembourg Rail Protocol will ensure that a private sector
option is available and it can be applied to projects such as
Thameslink and the Intercity Express Programme.”
In time, the Aviation and Rail Protocols could stimulate
mixed-asset capital markets deals.
“We may see bright sparks in the City devising capital markets
financings that incorporate both aviation and rail receivables and
assets in a single securitisation, particularly as airlines such as
Air France consider running both rail and air transport operations
and equipment lessors look to securitise their assets,” said
Rosen.
Recently, Rafael Castillo-Triana has been appointed as chairman
of the emerging markets task force for the Rail Working Group.
Its work will help to educate various countries about the
Luxembourg Rail Protocol by producing detailed documentation about
it in languages as diverse as Czech, Danish, Mandarin and
Russian.
The Rail Working Group has also identified the potential for
spin-offs in addition to the Luxembourg-based registry.
“We recognised early on that most countries do not have a
domestic public registry for registering title or security
interests in rolling stock as is the case with aviation,” said
Rosen.
“The whole question of unique and standard vehicle identifiers
is essential for the efficient operation of the Luxembourg Protocol
and is now being addressed.
“However, it will be a benefit to operators and financiers
within and outside of the Luxembourg Rail Protocol regime,” he
added.
