Transactions - JUNE 21, 2017

U.K. train operators get £1b financing from pension funds, insurers

by Jody Barhanovich

A consortium of pension funds and insurers has provided £1 billion ($1.27 billion) in debt and equity financing for U.K. train operators.


The financial close was reached to finance new Bombardier trains for the new South Western franchise operators FirstGroup and MTR. The transaction was led by sponsor Rock Rail and partners SL Capital — an affiliate of Standard Life Investments — and GLIL Infrastructure.


The core fleet will enter service from mid-2019 and consists of 90 new, state-of-the-art “AVENTRA” trains made up of 750 electric multiple-unit vehicles to be built by U.K. manufacturer Bombardier Transportation.

“Building on its previous rolling stock transaction structures, Rock Rail has secured broader and deeper funding from leading United Kingdom and overseas pension and insurance institutions who are directly investing in the U.K.’s long-term economic infrastructure,” said Mark Swindell, CEO of Rock Rail.

The deal is the latest success for the Rock Rail Consortium coming off the back of success in two previous major rolling stock deals last year. One of these deals included the addition of GLIL to a consortium of Standard Life’s SL Capital and RockRail to help fund rail fleets for Abellio East Anglia. GLIL provided approximately £45 million ($57 million) of equity to the group, funding 58 trains with 387 carriages for the line and increasing rail capacity by up to 78 percent for Norfolk and Suffolk.

This latest deal represents the largest single U.K. rolling stock deal for which all senior debt is provided by institutional investors. The debt funding group is made up of United Kingdom, European and North American institutional investors with the advice in relation to debt composition provided by DC Advisory.

“We continue to see further potential to provide competitive funding for new rolling stock across the U.K. rail network while offering highly desirable investment characteristics to our investors,” said Dominic Helmsley, head of infrastructure equity at SL Capital.

Daniel Hobson, senior investment manager, Greater Manchester Pension Fund and investment committee member at GLIL, believes this project is an excellent example of how pension investors can work with the private sector to help build the future of the United Kingdom.

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