The EBRD has invested USD 25 million in a debut five-year USD 600 million Eurobond launched by Russia’s Brunswick Rail, in order to support this long-standing client’s first approach to international capital markets.
In a parallel operation, the IFC, the private sector arm of the World Bank, has also invested USD 25 million in the same Eurobond issue.
The transaction involves Guaranteed Notes issued by Brunswick Rail Finance Limited, a special purpose vehicle registered in Ireland and part of one of Russia’s largest private rail operating lessors. The coupon on Brunswick Rail’s issue has been fixed at 6.50 percent. The Notes are redeemable at par on maturity.
This EBRD investment backs Brunswick Rail’s strategy of diversifying its financial resources and simplifying its capital structure. The Eurobond placing represents the first unsecured financing for Brunswick Rail which had to date mainly relied on the strictly ring-fenced funding that is typical of project finance.
The proceeds of the Eurobond will mainly be used to repay existing EBRD and IFC loans as well as finance the acquisition of railcars, including new generation railcars that are more technically advanced and can transport far heavier loads.
Russia’s Brunswick Rail was founded in 2004 and at present has a fleet of more than 22,000 railcars, most of which it provides to clients under operating leases, a fast-growing segment in which Brunswick Rail is a leading player.
Operating leases enable Brunswick Rail’s corporate clients to increase transport capacity without adding to their balance sheets or using cash to acquire non-core assets.
Because of Russia’s huge size, rail is the dominant mode of freight transportation in the country, accounting for 85 percent of freight turnover in 2011(excluding pipelines).