Bank of China contributes $100.8 million USD to a £1.36 billion GBP syndicated loan for the Thameslink Rolling Stock Programme

Project narrative

On June 26, 2013, the £1.77 billion GBP Thameslink Rolling Stock Programme (TRSP) achieved financial close. Part of the financing arrangement included a £1.36 billion GBP 22-year syndicated loan to Cross London Trains Ltd (XLT) to support the procurement of 1,140 carriages for the Thameslink Rolling Stock Programme. The London Branch of the Bank of China (BOC) participated in this loan syndicate and reportedly contributed $100.8 million USD to it. Cross London Trains Ltd (XLT) is a project company and special purpose vehicle (SPV) for TSRP, an effort of the wider £6 billion GBP Thameslink Programme to finance, design, produce, commission, maintain, and lease 1,140 Desiro City electric multiple unit (EMU) train carriages from Siemens, which would then be leased by the operator of the Thameslink rail franchise. TRSP also included the financing, design, construction, commissioning, and lease of two new Thameslink rolling stock maintenance depots at Hornsey in north London and Three Bridges in West Sussex. The shareholders in XLT were Siemens Project Ventures GmbH, which is a SPV that is a subsidiary of Simens Financial Services (SFS) (33.3% equity stake), 3i Infrastructure Plc (33.3% equity stake) and the Innisfree PFI Secondary Fund 2 (33.3% equity stake). In addition to BOC, another 17 financial institutions participated in the £1.36 billion GBP syndicated loan. These institutions were as follows: Barclays, Bayerische Hypo- und Vereinsbank AG, the Commonwealth Bank of Australia (CBA; CommBank), Crédit Agricole, Crédit Industriel et Commercial (CIC), the Development Bank of Japan Inc. (DBJ), Deutsche Bank, DZ Bank AG, HSH Nordbank AG, ING Bank N.V., Mizuho Bank, Landesbank Hessen-Thüringen (Helaba), Skandinaviska Enskilda Banken AB (SEB), Sumitomo Mitsui Banking Corporation Group (SMBC Group), Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU) (now known as MUFG Bank, Ltd.), Lloyds, and KfW IPEX-Bank GmbH. The project had a debt-to-equity ratio of 93:7 and a swap rate of 3.84%. The debt pricing was to change over the years of the contract in the following manner: Years 1 to 7: 265 basis points (2.65%); Years 8 to 9: 315 basis points (3.15%); Years 10 to 15: 355 basis points (3.55%); and Years 16 onwards: 370 basis points (3.70%). SMBC, BTMU, Lloyds, and KfW IPEX were the mandated lead arrangers (MLAs) of the £1.36 billion GBP debt, with KfW IPEX contributing £150 million GBP. The project received additional financing through £175 billion GBP in equity and sub-debt split between Siemens Project Ventures, 3i Infrastructure, and the Innisfree PFI Secondary Fund 2. The European Investment Bank (EIB) provided a £497,862,121.48 GBP loan for this project. Siemens Financial Services wholly financed the construction of the two depots. To assure lenders that any changes in the franchise of the Thameslink would not negatively impact the project (as a potential replacement of First Capital Connect, the then-franchisee was in debt problems and was seen as potentially been replaced with a different franchise, which would not necessarily have a higher credit quality), the British Secretary of State for Transport agreed to a 20-year undertaking that any new franchisee would have to sign a lease contract for Thameslink train on substantially same terms as the initial lease. Additionally, as contingency in case a lender pulled funding over the 22-year commitment, the sponsors and then other lenders would accelerate funding commitments while the sponsors would look for an additional or existing lender to fill the void, so long as that lender had a Moody's rating of A3 or above (the average of the existing lenders). In the event that the gap persisted, the Government of the United Kingdom would have the option to step in and either provide grant funding or debt on the same terms as the other lenders; if it declined to do so, the entire deal would be restructured to allow for the delivery of as many trains as possible using available funding under a new financing model. Furthermore, Siemens, as the supplier of the trains, promised to make good on a 5% dedication payable in the event the trains failed to meet service standards and to make whole lenders if there was a termination during the manufacturing period. If a termination occurred during operations because the trains' performance fell below specified levels, Siemens promised to provide less support, but enough to keep the lenders whole as while they procure a new set of trains, with the residual value of the existing trains to be used to pay the lenders once the new trains come into service. The overall Thameslink Programme sought to transform London's north-south train traffic via additional stations and longer trains. The existing Thameslink rail line is used as a commuter line and serves two London airports: Luton and Gatwick, and at the time of the commitment of financing most of its rolling stock were over 15 years old. TSRP, with its improved rolling stock, was expected to help ease congestion in the Northern Line of the London Underground. The trains procured under this project, Rail Class 700 Desiro City, were designed to be coupled to form eight and 12 car trains capable of operating in dual mode (750 V DC or 25 kV AC), with a top speed of 160 kilometers per hour (100 miles per hour). Each train was designed to carry up to 1,750 passengers, with all trains together providing an additional 15,000 extra seats for the Thameslink line. The 25-year concession for the design, construction, maintenance of the 1,140 EMUs in 115 units (115 trains) would bring a net increase of 480 in the number of carriages for the Thameslink line. These Desiro City trains were designed for suburban, regional, and mainline transport, being 25% lighter than the existing Desiro stock due to their lightweight aluminum construction and bogies being lighter in weight, more energy efficient, and reducing track wear by 50% when compared to predecessor trains. The trains were equipped with Siemens on-board units (OBU) that met the requirements for the European Train Control System (ETCS) Level 2 and enable train-to-trackside equipment communication between the trains and trackside equipment. The trains had heating, ventilation and air-conditioning (HVAC) systems with carbon dioxide sensors designed to automatically control the flow of fresh air depending on the number of passengers in each car. The trains were manufactured at Siemens' Krefeld, Germany factor, and had a recycling quota of approximately 95%. The first trains were to enter service in 2016. The final unit was initially expected to be completed in 2020. The first train was delivered and entered service in late June 2016 (the week of June 19/June 20, 2016, and before June 24, 2016). The entire fleet was delivered and operation in July 2018, after which Siemens began its maintenance period.