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Trinity Industries Forms $1 Billion Railcar Leasing Joint Venture

May 08, 2013, 07:05 AM
Filed Under: Rail Transportation

Trinity Industries, Inc. announced it has partnered with an institutional investment fund, Napier Park Railcar Lease Fund LLC (the “Napier Park Fund”) and an additional co-investor who also invested in the Napier Park Fund, to create RIV 2013 Rail Holdings LLC (“RIV 2013”), a joint venture that will provide railcar leasing services in North America. As part of the joint venture, RIV 2013 will acquire approximately $1 billion of railcars, primarily a combination of new railcars manufactured by Trinity Rail Group, LLC and existing railcars from Trinity Industries Leasing Company (“TILC”) or one of its subsidiaries. This joint venture allows Trinity to further grow its leasing platform and maintain its core relationship with its customers, while reducing the amount of capital investment required to grow the lease fleet.

RIV 2013 is expected to acquire a portfolio of approximately $1 billion in railcars through a series of transactions prior to the end of 2014. RIV 2013 currently owns the equity interest in Trinity Rail Leasing 2012 LLC (“TRL-2012”), an entity formed by TILC in December 2012 for the long-term financing of railcars, with a total of approximately $455 million in railcars at their current value. In the future, RIV 2013 will purchase up to an additional approximately $545 million of railcars from Trinity Rail Group, LLC, TILC or one of its subsidiaries to complete the planned portfolio.

TILC, the Napier Park Fund, and the co-investor have also contributed equity capital to complete the long-term capitalization of TRIP Rail Holdings LLC (“TRIP”), which holds an existing portfolio of 14,455 railcars purchased from Trinity and TILC over a two-year period from 2007 through 2009. Proceeds from the equity capital were used to fully repay TRIP’s $170 million of 10% Senior Notes due in 2014 and to purchase the equity interests of the legacy equity investors in TRIP other than TILC, which retained an equity interest in TRIP.

TILC will serve as manager and servicer of the TRIP and RIV 2013 portfolios of railcars. Both entities will be accounted for on a consolidated basis in Trinity’s financial statements. Income associated with the equity interest not owned by Trinity will be reflected as non-controlling interests.

The Napier Park Fund, organized and managed by Napier Park Global Capital, is primarily comprised of leading U.S. life and property and casualty insurance companies. The Napier Park Fund has committed a total of $362 million of equity capital to acquire a 60% equity interest in RIV 2013 and a 48% equity interest in TRIP. The co-investor has committed $50 million to acquire a 9% equity interest in RIV 2013 and a 7% equity interest in TRIP. TILC has committed $123 million of additional equity capital and will own 31% of the equity of RIV 2013 and 45% of the equity of TRIP. The remaining equity commitments to RIV 2013 will be combined with proceeds from expected future note issuances from the TRL-2012 Master Indenture to fulfill the remaining planned purchases of railcars. While the purchases are expected to be conducted by the end of 2014, the availability of the equity commitments from the joint venture extends into 2016.

Macquarie Capital advised Trinity on the capitalization of TRIP and the raising of private equity capital for RIV 2013 and TRIP.

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