The venture will be named GBX Leasing. Its formation and funding are anticipated to occur in the first quarter of this year.
Each year, GBX Leasing will acquire roughly $200 million of newly built and leased railcars from Greenbrier. Greenbrier will own about 85% of GBX Leasing; Longwood will own the remainder. Greenbrier will provide lease originations, remarketing and railcar administrative services, and Longwood will provide strategic and investment guidance, portfolio management, and management oversight, Greenbrier said.
“Today’s announcement is a logical bolt-on to Greenbrier’s leasing platform and commercial strategy, said Greenbrier CEO Bill Furman in a statement. “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’s existing leasing business will continue as is, but the two businesses will interact and work in coordination, Greenbrier spokesman Jack Isselmann explained to FreightWaves.
Serving as chairman and CEO for GBX Leasing will be Longwood CEO and railcar leasing veteran D. Stephen Menzies. Prior to forming Longwood in 2018, he was a senior vice president at Trinity Industries (NYSE: TRN), where he was also group president of Trinity’s railcar leasing, manufacturing and service businesses. Menzies also founded Transport Capital, a railcar leasing and asset management business that Trinity subsequently acquired, and he held leadership roles at Newcourt Capital and GATX (NYSE: GATX).
“Steve is a leader and innovator in the rail industry, with more than 30 years in rail equipment leasing, financing and manufacturing. He brings very recent customer relationships as well as extensive knowledge and expertise across multiple facets of the railcar leasing, financing and rail industries,” Furman said.
“I am excited to expand our relationship and to partner with Greenbrier in this important strategic development. Based on my experience, I am confident that GBX Leasing will deliver strong value to Greenbrier customers and its investors,” Menzies said.
Greenbrier views the joint venture as an opportunity to create stable, tax-advantaged cash flows and return on equity. It says the effort will be financed with non-recourse debt. GBX Leasing “complements [our] existing go-to-market strategy,” the company said.
The initial equity investment is tax-advantaged as a result of the five-year net operating loss carryback provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Greenbrier said.