ROYAL Bank of Scotland's shares surged 24.5p to 1038p yesterday, after its Angel Train Contracts subsidiary announced it had secured the biggest rolling stock financing deal in the UK rail industry's history.
Angel is to lease #375m worth of freight locomotives to English, Welsh & Scottish Railway (EW&S), a subsidiary of Wisconsin Central Transportation
Corporation which was created when the US group bought the bulk freight operations of British Rail for #225m in February 1996.
The 280 engines were ordered by EW&S about 18 months ago, when it turned its back on potential UK suppliers in favour of General Motors of the US.
General Motors has ordered 250 Class 66 locomotives from its electro-motive division in Canada. The remaining 30 Class 67 engines are being assembled for it by GEC Alsthom Transporte in Spain.
London-based Angel, one of the UK's three privatised rolling stock companies, was also optimistic yesterday about its chances of being selected to finance some of the #900m worth of trains which Richard Branson's Virgin Rail has ordered for its West Coast Main Line and CrossCountry passenger franchises.
John Vale, Angel's business development director, said it had a ''match option'' on this deal whereby, if it is beaten in the tendering contest, it can win up to half the business by matching the best deal on the table.
The financing deal with EW&S is believed to be bigger than the one for trains for the London Underground's Northern Line, which involved GEC.
An industry source said he understood the capital element of this was between #330m and #340m.
Vale said of the deal with EW&S: ''It is the biggest financing of rolling stock in this
country.''
It is also Angel's first venture into the freight market, and the company believes it beat strong competition from US leasing giants such as GE Capital and San Francisco-based Gatx, and from other UK finance companies in winning the business.
Angel will also be pitching to lease the 2500 wagons being built for EW&S by US group Thrall, at the former Asea Brown Boveri works at York.
Royal Bank bought Angel six months ago. It paid Japanese bank Nomura and its minority partners #395m for the equity of Angel, which has about #690m of debt secured against its guaranteed future income from the passenger train operating companies which lease rolling stock from it.
A Royal Bank spokesman declined to reveal what the deal with EW&S would yield in profit each year, or the length of the lease, but he said: ''(To get) something that is so significant only a short while after we bought it (Angel), clearly vindicates our decision to buy it.''
Vale said that Virgin wished to complete the financing transaction for the West Coast Main Line and CrossCountry rolling stock during the summer.
He added: ''We are obviously very confident that we have put a strong bid on the table. I have no doubt we will be up against stiff competition.''
He highlighted the fact that Angel had the match option on the deal because Virgin had used Angel's ATC Consulting arm to advise it in the selection of manufacturers. Virgin placed the #550m order for the West Coast line rolling stock with a partnership comprising Anglo-French joint venture company GEC Alsthom and Fiat Ferrovia of Italy. These will be built in
Birmingham.
The #350m order for the CrossCountry trains has been placed with Canadian group Bombardier, and the trains will be manufactured in European locations including Wakefield in Yorkshire.
Vale admitted that Royal Bank's existing relationship with Wisconsin Central - it helped the US group line up funding for the acquisition of the British Rail freight operations - had played a part in persuading EW&S to go with Angel. It is the main banker of EW&S, the UK's biggest rail freight company.
Vale said: ''I am sure that relationship helped. When you are entrusting the financing of your treasured asset to someone, you want to know you can get on with them and their parent, don't you?''
Commenting on the fact that the locomotives were being built overseas, Vale said: ''We are very happy to buy General Motors.''
He rated Loughborough-based Brush as the principal British builder of such locomotives, but he said there had been ''little locomotive building in the UK in the last 10 years''.
He added that what orders there had been for UK suppliers had been small, and had not given the manufacturers the chance to get costs down and ensure reliability to the same extent as a long production run would have done.
Vale said Angel also had a ''number of potential opportunities overseas'' in both passenger and freight train financing.
Shortly after its acquisition by Royal Bank, Angel secured a deal to finance #60m of new passenger trains for Regional Railways North East.
Angel chairman Iain Houston said of the EW&S deal: ''This landmark transaction demonstrates our commitment to playing a vital role in the renewal of Britain's railways.''
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