Through TRAMCO, Trinity and Element Financial seek to form "a diversified portfolio of up to $2 billion in leased railcars primarily consisting of new railcars manufactured by Trinity Rail Group and existing cars from Trinity Industries Leasing Co., as well as cars purchased in the secondary market," according to KeyBanc Capital Markets Inc. analyst Steve Barger.
As part of the alliance, Dallas-based Trinity will serve as the originator and servicer of Toronto-based Element Financial's $2 billion portfolio of railcars.
Said Barger, "We think this transaction, along with the earlier RIV deal, are examples of TRN's proactive approach toward managing EPS visibility and cash flow. While we cannot currently predict the cash flow implications of this latest deal, we think it is clear that the impact of the $2 billion in railcar acquisitions (which may include secondary market transactions) should have a positive effect on TRN's existing $1.2 billion liquidity position."
Barger added, "Overall, we think this is another smart transaction that should improve liquidity and flexibility while helping allay investor concerns around EPS cyclicality."