The Greenbrier Companies, Inc., an international supplier of equipment and services to global freight transportation markets, announced it has completed the formation of GBX Leasing, a special purpose subsidiary, to own and manage a portfolio of leased railcars primarily built by Greenbrier.
GBX Leasing will acquire approximately $200 million per annum of newly built and leased railcars from Greenbrier. The initial portfolio for GBX Leasing has been identified from leased railcars on Greenbrier's balance sheet or in its backlog. GBX Leasing 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.
GBX Leasing completed an initial funding of nearly $100 million from a new $300 million non-recourse railcar warehouse credit facility and intends to be levered by approximately 3-to-1 debt to equity. Leased railcars will be aggregated to obtain permanent debt financing through the asset-backed securities market. GBX Leasing will be consolidated in Greenbrier's financial statements, and Greenbrier initially owns about 90 percent of GBX Leasing.
The Longwood Group, a Chicago-based transportation equipment advisory and asset management firm, will own the balance. Longwood was formed by D. Stephen Menzies in 2018 to pursue a range of commercial investments in freight rail equipment and adjacent transportation markets. Prior to Longwood, Menzies was Senior Vice President, Trinity Industries and Group President of Trinity's railcar leasing, manufacturing and services businesses. Under Menzies leadership, leased railcar assets under ownership or management grew to exceed $10 billion while he also held responsibility for its highly successful North American manufacturing operations. Menzies is Chairman & CEO of GBX Leasing.
Greenbrier CEO and Chairman William A. Furman stated, "We are extremely pleased to have finalized the formation of GBX Leasing, which marks an evolution of Greenbrier's leasing platform and our commercial and leasing strategy. GBX Leasing creates a new annuity stream of tax-advantaged cash flows, while reducing Greenbrier's exposure to the new railcar order and delivery cycle. From a commercial standpoint, it is a strong complement to our integrated business model of railcar manufacturing and services that further enhances our distribution strategies to direct customers, operating lessors, industrial shippers and syndication partners. We expect that the joint venture will help Greenbrier continue to grow its diversified customer portfolio with a focus on industrial shipper customers and small batch production to leverage long-standing customer relationships and capabilities gained through the acquisition of ARI."
As reported on Equipment Finance Advisor, Greenbrier announced plans to form GBX Leasing in February.