Trinity Industries, Inc. (NYSE:TRN) announced today that its newly formed, wholly-owned subsidiary, TrinityRail Asset Management Company, LLC (“TRAMCo”), has entered into a strategic alliance with Element Financial Corporation (TSX:EFN) (“Element”), one of North America's leading equipment finance companies, and is expected to develop a diversified portfolio of up to $2 billion of leased railcars. Under the terms of the multi-year program agreement, Element will acquire a portfolio of leased railcars primarily consisting of new railcars manufactured by Trinity Rail Group, LLC, existing railcars from Trinity Industries Leasing Company (“TILC”), as well as secondary market purchases identified by TRAMCo and Element. TILC will act as servicer of the Element-owned leased railcar fleet and receive fees accordingly.
It is expected that Element will initially purchase approximately $500 million of existing leased railcars from TILC. The first purchase of approximately $100 million of these leased railcars is expected to close on or before December 31, 2013 with the next $400 million expected to close by the end of first quarter of 2014. Subsequent to the initial sale, an additional $500 million of purchases are expected to occur through 2014 and primarily consist of new TrinityRail manufactured railcars, the majority of which are in Trinity’s current leasing order backlog. The remaining $1 billion of the targeted $2 billion of railcar purchases by Element is anticipated to occur in 2015. These purchases may include a combination of newly manufactured railcars, existing TILC leased railcars, as well as secondary market purchases. TILC will not retain an ownership interest in any of the leased railcars sold to Element. Macquarie Capital advised Trinity on this alliance.
“We are excited to form this strategic alliance with Element, which shares Trinity’s long-term view regarding the attractive nature of investing in leased railcars,” said D. Stephen Menzies, Trinity Industries, Inc. Senior Vice President and the group president responsible for Trinity’s railcar manufacturing and leasing businesses. “Aligning Trinity’s expertise in railcar leasing and management services with Element’s proven leadership and committed financial resources is an ideal strategic combination. This alliance complements our other funding vehicles and further enhances Trinity’s financial resources and flexibility to grow our railcar leasing platform,” added Mr. Menzies.