Trinity Industries, Inc., and global alternative investment manager Wafra, Inc., have teamed on a new program that will invest in “diversified portfolios of leased railcars originated by Trinity Industries Leasing Company.” It will target up to $1 billion in total acquisitions over a three-year period, the companies reported.
Trinity and Wafra on Aug. 18 said the railcar investment vehicle (RIV) program is structured as a new joint venture, Signal Rail Holdings LLC, between Trinity and certain funds managed by Wafra (Wafra Funds). Wafra Funds is 90% owner of Signal Rail. As 10% owner, Trinity Industries Leasing Company will continue to service all railcars owned by Signal Rail.
Signal Rail has acquired an initial portfolio of about 3,600 railcars, “representing a diverse pool of on-lease railcars from TILC’s [Trinity Industries Leasing Company’s] leased railcar fleet,” according to Trinity and Wafra. It financed the acquisition “through SRL 2021-1, an asset-backed securitization comprising $265 million in two classes of notes rated by S&P and KBRA,” the companies said.
Why is this partnership important? Railway Age Financial Editor David Nahass explains:
“This transaction by Trinity and Wafra continues to demonstrate the incredible volume of liquidity pursuing investment in freight rail assets operating in North America. While the rail industry and the railcar lease market often seem at a pivot point in terms of demand for loadings and railcar rental rates that are below expectation, outside investment capital sees a long-term value proposition with opportunities for real investment returns. Railcars remain long-lived assets that hold incredible opportunities for cash flow over decades. This transaction is an incredible reaffirmation of the fundamentals underpinning investment in railcars.”
“We are excited to join with Wafra as the latest partner in our RIV platform,” Trinity President and CEO Jean Savage said. “This joint venture brings together parties with aligned strategies of long-term investments in quality assets with high-quality investment partners like Wafra. We believe today’s [Aug. 18] announcement underscores the attractive return and cash flow attributes of our railcar assets. This partnership is an important milestone in Trinity’s long-term plan to optimize our balance sheet and amplify our return on equity.”
“Through this joint venture, Wafra builds on its portfolio of high-quality real asset investments,” Wafra CEO Fawaz Al-Mubaraki said. “As long-term investors, we recognize the importance of forming partnerships with industry leaders like Trinity, as well as ensuring meaningful alignment as the basis of shared success. We look forward to growing our partnership with Trinity in the years ahead.”