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1995-11-09 DoT-001
Department of Transport

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Britain creates new train leasing market with #1.8 billion sale


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British Rail
privatisation
rolling stock leasing
train leasing



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Department of Transport

Britain creates new train leasing market with #1.8 billion sale
_______________________________________________________________


date
9 November 1995
source Department of Transport
type Press release

note 360


Announcing another important step in the privatisation of the rail
industry, Transport Secretary, Sir George Young, unveiled the #1.8
billion sale of the Government's passenger train fleet - the largest
ever privatisation by direct sale in the UK.

The sale of the three passenger rolling stock leasing companies
(ROSCOs) - Angel Train Contracts, Eversholt Leasing, and Peterbrook
Leasing - opens up a new competitive market for the supply of rolling
stock in Great Britain, and follows an international auction
conducted on behalf of the Government by Hambros Bank.

Welcoming the new, open market for passenger trains, Sir George Young
said:

"This is Britain's largest ever privatisation by direct sale. It has
attracted substantial interest from international institutions from
all major capital markets - the UK, USA and Japan. It is clear
evidence that the Government's plans for renewal of the country's
rail industry are drawing wide support from the business community.

"These purchasers are demonstrating a strong commitment to the
development of a competitive market for passenger rolling stock. In
addition to taking over the existing train fleet and the Networker
Express fleet currently on order, the new owners bring access to
additional funds to finance new trains and refurbish existing rolling
stock."

Turning to the future, Sir George Young said:

"I'm encouraged by the purchasers' positive attitude to future
investment in new rolling stock.

"Leasing has revolutionised the financing of our airlines. It is now
set to do the same for our railways. This competitive process has
encouraged leading international banks, train manufacturers and
leasing companies to explore the prospects for a new market. From
today we can expect open and imaginative competition to finance
further investment in Britain's railways."

Total proceeds from the sale exceed #2.5 billion. This includes some
#800 million which will be paid to the Government in cash as
dividends from the ROSCOs before sale, plus the actual sale price
payable by the purchasers of approximately #1.8 billion.

The three companies are:

Angel Train Contracts- acquired for #672.5 million by Prideaux &
Associates, Babcock & Brown and Nomura International plc.

Eversholt Leasing- acquired for #580 million by a consortium led by
Candover Partners Limited together with the Eversholt management.

Porterbrook Leasing- acquired for #527 million by funds managed by
Charterhouse Development Capital and the Porterbrook management.

As well as purchasing the existing train fleet and taking over the
Networker fleet currently on order, all the purchasers are in a
position to arrange additional funding for the continuing
modernisation of Britain's passenger railways through investment in
new trains and refurbishment of existing rolling stock.

Acting on behalf of the Government and using its experience in the
leasing market, Hambros structured the three companies, recruited
senior management, and put in place the lease and maintenance
contracts which underlie the new market. Hambros have briefed banks,
leasing companies and manufacturers all over the world resulting in a
shortlist of investors and financiers from the UK, USA, Japan, France
and the Netherlands.

Sale and purchase agreements were signed on Tuesday and Wednesday.
Completion of the sales is conditional on clearance by the
appropriate regulatory authorities and final documentation.

Angel Train Contracts ("ATC")

ATC has been acquired for a price of #672.5 million by GRS Holding
Company Limited. The GRS Holding Company Limited is a consortium
comprising Prideaux & Associates, the leading railway consultancy
company chaired by Dr. John Prideaux; Babcock & Brown, the specialist
leasing, asset and finance company; and Nomura International plc, the
London based investment bank.

Dr. John Prideaux, who is a former Managing Director of InterCity and
former Chairman of Union Railways, will become Chairman of the
operating company. Commenting on the Government's decision to sell
ATC to the GRS Holding Company Limited, Dr Prideaux said today:

"The GRS consortium aims to provide an outstanding leasing service to
the train operating companies and that is how we will succeed as a
business. We will be a customer oriented company and have an
important role in providing rail passengers with a safe, reliable and
comfortable railway service."

The funding will be arranged and underwritten by Nomura International
plc, the UK based wholly owned subsidiary of Nomura Securities Co.,
Ltd. The Nomura group is a leading international investment bank,
with total assets of #51 billion and a capital base of nearly #13
billion. Mr Hitoshi Tonomura, Executive Vice President of Nomura
Securities Co., Ltd. welcomed the opportunity to participate in
financing Britain's railways:

"Nomura is delighted to be part of the GRS consortium which has been
selected to purchase ATC. This is a very exciting challenge and one
which the GRS Holding Company Limited is exceptionally well qualified
to meet. As a major financial institution, we are committed to the
UK and are delighted to be able to help the development of Britain's
railways and give ATC access to the international capital markets."

Eversholt Leasing

Eversholt has been acquired for a price of #580 million by a
consortium of institutional investors led by Candover Partners
Limited. #80 million of the sale price is deferred and will become
payable when specified technical and financial performance thresholds
are achieved by the fleet of 164 new Networker Express vehicles
currently on order from ABB.

The consortium comprises:

funds managed by:

Candover Partners Limited
Electra Fleming Limited
Alpinvest Holding N.V.
Advent International plc
BZW Private Equity Limited
Gartmore Private Capital

and The Royal Bank of Scotland

The consortium is to invest #70 million in equity. The management and
employees will share in up to 15 per cent of the equity share capital
through subscription for shares and option schemes. The debt has been
arranged by Deutsche Morgan Grenfell and underwritten by Deutsche
Morgan Grenfell, Fuji Bank, Societe Generale and The Royal Bank of
Scotland.

Eversholt has on order from ABB 41 four-car Networker Express trains.
Twenty-five of these new units are due for delivery to West Anglia &
Great Northern (WAGN) who will operate them on Kings
Cross-Peterborough services: the vehicles currently being used by
WAGN (which are approximately 10 years old) will be transferred to
LTS Rail where they will replace stock, which is almost 40 years old,
on the line serving Fenchurch Street, Southend and Shoeburyness.
Sixteen new Networker Express units will be delivered to South
Eastern for use on Kent Coast express commuter services, replacing
stock which is over 30 years old. Thousands of passengers will
benefit from this new deployment of trains.

With the backing of a strong banking and equity syndicate Eversholt
has the capability to respond to any demand from its customers for
new trains.

Mr Peter Harper, who was formerly Chairman of Hanson Industrial
Services, will become chairman of Eversholt. Mr Andrew Jukes, who
was formerly with London Underground and British Rail, is managing
director. Referring to the Networker Express trains currently on
order Mr Jukes said:

"Eversholt is charged with the important task of introducing these
advanced new trains into service for our customers. In addition, we
have a powerful consortium of backers and look forward to responding
to all our TOC customers' needs for fully maintained, refurbished
trains or new rolling stock. "

Porterbrook Leasing

Porterbrook has been acquired for a price of #527 million by a
consortium led by its management team, with equity investment of #75
million by funds managed by Charterhouse Development Capital and bank
facilities totalling #490 million, to fund the acquisition and
provide working capital, fully underwritten by Bankers Trust. The
consortium is in discussions with Bankers Trust with a view to
arranging further banking facilities totalling
#100 million to finance the purchase of new trains.

Management and employees will share in up to 20 per cent of the
equity share capital through subscription for shares and option
schemes; in addition, a profit-related pay scheme will be introduced
for all employees.

Dr Peter Watson OBE will become chairman of Porterbrook: Dr Watson
was formerly the engineering Board Member of British Rail and is now
Chief Executive of AEA Technology.

The Managing Director of Porterbrook is Sandy Anderson, former
Managing Director of TIP UK Ltd, a major operating lease company.
Emphasising the contribution the private sector can make to the new
rail industry he said:

"The operating lease market thrives by delivering to its customers
the best equipment and service, under flexible contracts with the
cheapest available finance. Our team is enthusiastic to equip our
train operator customers with the trains their customers want to
travel in, on the best possible terms."

Employees

All the purchasers have confirmed that the existing rights of
employees will be fully safeguarded. All the purchasers have
committed themselves to introduce incentive schemes for employees,
whether by way of participation in ownership or otherwise.

Notes to Editors
1. Enquiries:


Hambros Bank: Roger Mountford Tel:0171-480 5000

Angel Train Contracts - acquired by GRS Holding Company, a consortium
comprising Prideaux & Associates, Babcock & Brown and Nomura
International plc. Contact Martin Roche Tel: 0171 485 4044, mobile
0836 340364.

Eversholt Leasing - acquired by a venture capital consortium led by
Candover Partners Limited together with the Royal Bank of Scotland
and the Eversholt management. Contact Andrew Jukes, MD, Eversholt
Leasing Ltd; Peter Harper, Chairman, Hanson Trust 0171 245 1245;
Stephen Curran (Chief Executive) or Colin Buffin (Director) Candover
Investments plc 0171 489 9848; and Rupert Ashe, Director, Focus
Communications Group 0171 600 1392.

Porterbrook Leasing - acquired by funds managed by Charterhouse
Development Capital and the Porterbrook management. Contact Geoff
Arbuthnott, Charterhouse 0171 248 4000 or Sandy Anderson, Porterbrook
01332 262293.

2. Hambros were first appointed in July 1993 by British Rail
following a competitive tender, to advise on the creation of a
competitive market for the leasing of rolling-stock. A joint team
from Hambros' leasing and corporate finance divisions designed the
three rolling-stock companies, advised on the allocation of the
fleet, prepared the leasing documents and calculated the lease
rentals.

Following a further competitive tender Hambros were appointed in
August 1994 to advise the Department of Transport on the sale
process, to market the companies internationally and to negotiate the
sales.

The Government's other principal advisers on the sale of the ROSCOs
were:

Legal advisers: to DoT :Freshfields
to BR :Clifford Chance

Reporting accountants :Price Waterhouse
Marketing advisers :Gresham

SUMMARY OF ROSCOs

ATC EVERSHOLT PORTERBROOK
Vehicles owned at 31.3.95:

electric multiple units vehicles: 2,099 2,684 1,615
diesel multiple units vehicles: 1,094 - 681
highspeed trains (Intercity 125) 539 - 370
locomotives and loco hauled - 1,366 683
other 21 - 106

3,753 4,050 3,455

Average age of vehicles 16 yrs 18 yrs 16yrs

Vehicles on lease at 31.3.95 3,601 3,514 3,286

Number of TOC customers 19 16 16

Location Islington Euston Derby
London London

Number of employees at 31.3.95 51 60 39

Financial information for the
year ended 31.3.95(#m)

- Turnover 290 240 267
- Maintenance Charge 134 89 134
- Profit before interest/Tax 107 111 90

# = pounds sterling


Railhub Archive ::: 1995-11-09 DoT-001





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