Overseas banks lend AUD 1bn to Regional Rail project

15 February 2019 - 12:00 am UTC

Five banks from Europe and Asia are lending to the AUD 1.26bn (USD 893m) PPP supplying new trains for the NSW regional rail service TrainLink. 

Sources familiar said these are Spanish bank Caixa, KDB Bank, HSBC, MUFG Bank and Societe Generale under a mini-perm structure, with tenor of around seven years. Caixa, HSBC and Societe Generale are each lending AUD 185m, KDB AUD 130m and MUFG AUD 310m.

The margin over BBSY is about 170 basis points.

Financial close was reached on Friday (15 February) following contractual close on Thursday, according to two sources familiar.

The structure is unusual, according to sources. While the government has an option to take back the trains after 15 years, the PPP in fact “notionally” extends for another 20 years beyond that. There are several proposals for high speed rail in NSW and nationally and this structure is said to give the state flexibility to shift to new technology that may emerge by then.

However, if it does choose to take back the trains before the 20-year extension period it would take on the debt that still exists in the vehicle. Most PPPs involve the SPV handing back the asset debt free.

The NSW government confirmed on Thursday that the Momentum Trains consortium – CAF Investment Projects, CIMIC subsidiaries Pacific Partnerships, CPB Contractors and UGL as well as DIF Infrastructure V Coöperatief – had been awarded the Regional Rail PPP.

The project involves designing, building, financing and maintaining the new trains for 15 years. 

There will be 117 new carriages forming 10 regional intercity trains, nine “short regional trains and 10 long regional trains”, according to the government.

These will replace old XPT trains that operate between Sydney, Melbourne and Brisbane as well as from Sydney to Dubbo, Grafton and Casino in regional NSW. 

It will also replace 50 XPLORER and Endeavour trains that run to smaller centres in regional areas of NSW as well as between Sydney and Canberra.

The first trains are expected to be running from 2023. 


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