The Greenbrier Companies and Longwood Group intend to create a joint venture – GBX Leasing, to develop an owned portfolio of leased railcars primarily to be built by Greenbrier.
The establishment of GBX Leasing is subject to the completion of final documentation by the parties and the origination and funding of the joint venture is anticipated to occur in the first quarter of 2021.
Greenbrier will own about 95% of GBX Leasing with the balance held by Longwood and will provide lease originations, remarketing and railcar administrative services to the new company. Longwood will provide strategic and investment guidance, portfolio management and management oversight.
The JV will be governed by a board of three Greenbrier representatives and one Longwood representative. Longwood CEO Stephen Menzies will serve as Chairman and CEO of GBX Leasing.
The establishment of the joint company will allow the procurement of approximately USD 200 million of newly built and leased railcars per year from Greenbrier.
The joint venture will be financed with non-recourse debt and is expected to be levered about 3:1 debt to equity. A separate, initial USD 300 million warehouse debt facility will be established to facilitate the company’s activities. GBX Leasing will aggregate leased railcars to obtain permanent debt financing issued in connection with asset-backed securities. Greenbrier will consolidate GBX Leasing and intends to provide additional public disclosure regarding its leasing business with its second fiscal quarter financial reporting.
The initial portfolio for GBX Leasing has been substantially identified from leased railcars on Greenbrier’s balance sheet or in its backlog. The new company will observe Greenbrier’s established, strict portfolio standards for long-term investment, including credit quality, asset diversity, balanced maturities and asset liquidity.
The initial equity investment is tax-advantaged as a result of the five-year net operating loss carryback provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, bonus depreciation and the MACRS depreciation system.
The “announcement is a logical bolt-on to Greenbrier’s leasing platform and commercial strategy. The railcar portfolio built by GBX Leasing will create a new annuity stream of tax-advantaged cash flows while reducing Greenbrier’s exposure to the new railcar order and delivery cycle. This move bolsters Greenbrier’s value proposition for its customers and shareholders,” Greenbrier CEO William Furman said.