Consortium becomes third-biggest UK rolling stock leasing company

A CONSORTIUM made up of investment bank Morgan Stanley and private equity houses 3i Infrastructure and Star Capital has bought HSBC’s train rolling stock unit, Eversholt Rail Group, for £2.1bn. The deal took five months of talks before it came to fruition.

The new consortium, which is named Eversholt Investment Group, immediately becomes one of the three biggest rolling stock companies in the country, owning about 29 cent of the total current British rail fleet with 19 fleets of rolling stock that are designed and built for the UK rail network. It will lease its fleets to seven train operating companies.

HSBC is the last UK high-street bank to dispose of its train-leasing business, after both RBS and Santander off-loaded theirs in 2008.

“We are delighted to be acquiring Eversholt,” said Neil King, partner in the infrastructure team at 3i Investments PLC, which manages 3i Infrastructure.

“Its strong market share, well-diversified customer base and high quality cash flows from leases contracted over the medium to long term make this an attractive asset with strong infrastructure characteristics.”

The three members of the new group will each pay £176m of equity with the remainder of the money being financed with debt. Eversholt Investment Group said that the steady cash stream that the rolling stock will produce will be sufficient to service the interest.