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Land Transport Finance

Hessische Landesbahn GmbH, a core client of Land Transport Finance for many years, and one of the leading independent regional passenger rail operators in Germany, sought an efficient operating lease financing solution for newly-ordered Diesel multiple units (DMUs) at the beginning of 2010. During an intensive structuring process in close co-operation with the client, the optimal financing solution was defined. In March 2010, after a mere three months, the transaction was successfully closed. The competitive financing structure for the 23 DMUs enabled Hessische Landesbahn to win the franchise tender for "Lahntal/Vogelsberg" against strong competition. The franchise comprises three lines with about 2.4 million train kilometres per year linking several cities and municipalities to the north of Frankfurt/Main, Germany. The lines feed thousands of passengers into Rhein-Main Verkehrsverbund (RMV), the third largest regional transport network organisation in Germany.

Land Transport Finance provided key support to the deal as Joint Lender into the transaction, taking the true residual value risk bullet loan tranche which is non-recourse to the operator, and by serving as Security Agent for the deal. The structured operating lease financing comprises a PDP-financing plus a term loan amortising down to a balloon. Total project volume was about €65 million. The debt portion was shared with two partner banks who took the entire amortising tranche. The leasing vehicle, which acts as buyer under the procurement contract as well as owner and lessor of the equipment, was set up by a leading German finance lease house in the transport industry. The finance lease house is also administering the lease assets throughout the entire operating lease term. The 23 modern Alstom Lint 41 regional passenger DMUs financed are proven and standard rail technology from a high quality manufacturer. Lint 41 are the best selling two-car DMU trainset in Germany and the third best selling DMU type in Europe over the past 13 years. The Lint 41 is operated by 17 railway companies in Germany and in other European countries.

The transaction is important because it

  • gave evidence of how well we serve our clients in difficult times of economic downturn;
  • demonstrated Land Transport Finance’s capability to properly assess and take residual value risk;
  • allowed Hessische Landesbahn to win an attractive franchise, using modern trains;
  • added another lucrative operating lease transaction to our asset finance portfolio, taking advantage of a highly attractive refinancing structure.

We are proud to have been awarded Jane's Transport Finance "European Rail Finance Deal of the Year 2010" for this prestigious transaction in November 2010, thereby contributing another asset finance accolade to our track record.