Alpha Trains: First green bonds in the rail sector in the USPP market
When Alpha Trains decided to refinance debt associated with the acquisition of 63 new energy efficient train cars, it was essential that they found a financing partner that understood sustainability, infrastructure financing, and cross-border transactions.
Alpha Trains, headquartered in Luxembourg, is the leading and largest private operating lessor of passenger trains and locomotives in Continental Europe. Established in 1999, the company has 100 employees in 11 countries, servicing Alpha Trains’ fleet of 435 passenger trains and 380 locomotives. Alpha Trains’ rolling stock are used by public and private operators in 13 European countries.
When the company decided to refinance debt associated with the acquisition of 63 new train cars equipped with the most energy efficient technology in order to reduce the energy consumption of passenger transportation, it was essential that Alpha Trains found a financing partner that understood sustainability, infrastructure financing and cross-border transactions. To meet the unique needs of the company, Alpha Trains selected ING to securing financing.
ING found a strong investor appetite for high quality, long-dated investment opportunities, combined with an increasing willingness from investors to provide non-US dollar denominated funds. These two factors allowed Alpha Trains to raise long-term capital at attractive all-in levels.
To secure the financing, ING worked with Alpha Trains Group to tap the US Private Placement (USPP) market for the first time in its financing history with a transaction that can be labelled as the world´s First Green Private Placement ever completed by a leasing company in the rolling stock sector. Alpha Trains raised €250m which it has exclusively used to refinance debt associated with the acquisition of the new energy-efficient rail cars; offerings which were purchased by five institutional investors.
“The US Private Placement market has seen a good number of infrastructure transactions in 2016 and year to date 2017,” said Scott Dainton, head of Debt Capital Markets. “The tangible, long-term nature of the assets found in infrastructure transactions combined with favorable market conditions make these transactions very attractive to the institutional investment community.”
ING also assisted Alpha Trains in developing its green private placement framework and obtaining both a positive second party opinion from Sustainalytics and a certification from the Climate Bond initiative. The Sustainalytics opinion gave credibility to the Green Private Placement because the financing is transparent and provides clarity regarding use of proceeds and the outcomes of the investments. The green financing was structured with two classes of senior secured green notes, one with a Euro-denominated floating rate bullet maturing in 2028 and the other a euro-denominated floating rate amortizing note maturing in 2036.
The end result is a long-dated financing for Alpha Trains, representing one of the first labeled green bonds ever completed in the USPP market and is structured following the best-in-class standards in the green bond market. This transaction is also the first green bond ever issued in the Continental Europe rolling stock sector.
“We are proud to have obtained the Climate Bond certification for this transaction as the first rolling stock lessor in the world, which is a milestone for both our financing, environmental and social responsibility strategies. This new source of capital widens our lender base. And, by providing modern and energy efficient electric rolling stock, we contribute to the achievement of the European Union's greenhouse gas reduction targets and support the sustainable development goals of creating safe and sustainable cities,“ said Shaun Mills, CEO of Alpha Trains.