Teams revealed in auction for short-haul railroad owner

05 June 2019 - 12:00 am UTC

There are at least two recently formed teams making a bid for short line railroad holdco Genesee & Wyoming, said three sources familiar with the situation.

The first consortium is comprised of Blackstone Infrastructure Partners and Stonepeak Infrastructure Partners, said the sources. Brookfield Infrastructure Partners, which was slated to reach a first close of its Brookfield Infrastructure Fund IV having raised USD 14bn, is also bidding for the asset.

The consortia recently submitted indicative bids for the company.

News of the firm’s interest in G&W was first reported in Bloomberg last week.

Blackstone and Brookfield declined comment on the situation. Stonepeak did not return multiple calls seeking comment.

As reported, G&W retained BofA Securities to explore strategic alternatives.

The Darien, Connecticut-based short rail operator has built itself over time with acquisitions, and at times has also heavily involved itself with infrastructure and private equity funds. It owns assets in the US, UK and Australia.

In 2013, Carlyle agreed to invest up to USD 800m in G&W to help back its buyout of RailAmerica. That investment came out of its fifth private equity fund, the USD 13.7bn Carlyle Partners.

Three years later, it sold 49% of its Australian business to Macquarie Infrastructure and Real Assets (MIRA). MIRA also has a USD 169m subordinated shareholder loan with G&W, according to SEC filings.

The company reported a slight decrease in 1Q19 operating revenues to USD 558.1m from USD 574.7m, year-over-year, while operating income dropped 8.3% to USD 79.7m over the same time period.

In an April 30 press release announcing earnings, G&W announced it “evaluated potential acquisitions and investments,” but did not comment on the auction process.

On its 1Q19 earnings call, G&W executives expected to recover half of its income shortfall in North America from “winter weather as well as to benefit from our cost initiatives and the new business pipeline.” This included contracts to operate railroads at the Port Of Caddo-Bossier on the Red River near Shreveport, Louisiana.

Overall, the company had net debt of USD 2.3bn and total leverage of 2.8x based off TTM EBITDA, ended 31 March, according to a company presentation.

G&W’s capital structure consists of a USD 1.737bn senior credit facility due 2023, a USD 458m Australian senior secured credit facility due December 2021 and the subordinated loan with MIRA.

G&W secured the USD 1.737bn facility in June 2018 with BofA Securities leading the deal while JPMorgan, Citigroup and MUFG served as co-lead arrangers. The credit facility is split into a USD 1.423bn USD term loan, a GBP 272.9m term loan and a USD 625m revolver.

 

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