Home / EMEA / Brunswick Rail completed a transaction to raise up to USD 150 million through the issue of preference shares

Brunswick Rail completed a transaction to raise up to USD 150 million through the issue of preference shares

Brunswick Rail Limited, Russia’s leading privately owned freight railcar operating lessor, announced that it has, with the help of the European Bank for Reconstruction and Development, completed a transaction to raise up to USD 150 million through the issue of preference shares with the aim of funding the growth of the Company’s business.

The EBRD may allocate up to USD 30 million of the Preference Shares to international investors, with the remainder of the Preference Shares to be held by EBRD on its own account.

The EBRD may allocate up to USD 30 million of the Preference Shares to international investors, with the remainder of the Preference Shares to be held by EBRD on its own account.

The Preference Shares are a bespoke pre-IPO equity instrument designed to provide Brunswick Rail with an alternative source of equity capital from a new strategic shareholder.

Key Transaction Terms
The terms of the Preference Shares have been crafted to maximize the financial flexibility of the Company, providing it with the equity required to grow the business in accordance with its business plan. The Preference Shares will rank senior to common equity, but subordinated to all other forms of capital. The Company has the option to defer dividend payment on the Preference Shares.

The Preference Shares will be classified as equity under IFRS.

Use of Proceeds 
Proceeds from the placement, which may be completed in up to six tranches over a fifteen month subscription period, will be used to finance Brunswick Rail’s investment program for 2014 and 2015.

Brunswick Rail’s discretionary expansion program is designed to increase the growth of the fleet to 40,000 railcars by 2018 through both organic growth and M&A. In addition, the Company aims to optimize its fleet by increasing the mix of specialized and «next generation» railcars in the fleet.

Alex Genin, Chief Executive Officer of Brunswick Rail, commented: «This is a landmark transaction for Brunswick Rail and will be a catalyst for further development of the Company. The completion of this deal shows that, despite current market sentiment, there is still appetite to finance high quality corporate stories where there are clear growth opportunities. In September 2013, Brunswick Rail’s Board of Directors approved a strategy to expand our fleet. This financing will allow us to fulfill that mandate at a time when we believe railcar prices have reached the bottom of the cycle.»

Nicolas Pascault, Chief Financial Officer of Brunswick Rail, added: «These Preference Shares are a highly innovative and unique financial solution that has been tailor made to meet Brunswick Rail’s precise funding requirement, whilst securing an additional important strategic shareholder. The incremental revenue and EBITDA that we expect can be generated from the proceeds should allow for an increase in our levels of financing, without putting our key credit ratios under significant pressure. In addition, our credit position should improve over time as the additional scale derived from the proceeds of the investment program will allow us to grow revenue and reduce overall borrowing levels. Brunswick Rail believes that the EBRD’s investment represents a strong vote of confidence in the business, its management and the overall business plan.»

Brunswick Rail was advised on the transaction by Goldman Sachs International.

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