The Channel Tunnel Rail Link – known as HS1 – has completed a £1.6 billion (€1.9 billion; $2.5 billion) refinancing of the £1.3 billion of bank debt that was deployed when Canadian institutional investors Borealis and Ontario Teachers Pension Plan (OTPP) paid £2.1 billion to acquire a 30-year concession to own and operate the UK high-speed rail line in November 2010.
Following a road show last week, HS1 was able to raise £760 million in the UK bond market – well in excess of a target amount of £455 million. Other funding was raised from a US private placement last year and a new bank facility. The new debt structure will amortise over the life of the concession.
“It is very good news that we have not only met our refinancing targets but done so ahead of schedule,” said HS1 chief financial officer Graeme Thompson in a statement. “Market conditions and the fact that HS1 is low risk, good quality high-performing infrastructure has meant our proposition has been very well received and we appreciate the investor support.”
Banks involved in the bond issue included BNP Paribas, Lloyds, RBS, NAB and Scotiabank. Export Development Bank of Canada participated in the bank facilities.
The statement said that the number of passengers using Eurostar (the international train operator that uses HS1) and Southeastern High Speed (the UK domestic operator that uses HS1) has grown each year. On the retail/non-regulated side of the business, HS1 “has also grown strongly, outperforming the high street with significant growth year on year”.
HS1 connects St Pancras International station in central London with the UK entrance to the Channel Tunnel, linking the UK to the European high-speed network with direct routes from London to Paris, Lille, Brussels and beyond. It is also the owner of stations along the route including St Pancras, Stratford International in east London and Ebbsfleet International in Kent.
In paying £2.1 billion for HS1 in November 2010, Borealis – the investment arm of Ontario Municipal Employees Retirement System – and OTPP exceeded the UK government’s expectations of raising between £1.5 billion and £2.0 billion. The Canadian pairing beat off competition from three other consortia led by Eurotunnel, Morgan Stanley and Allianz.
Last week, the UK government announced the preferred route for the £32 billion HS2 high-speed rail line which will connect London to Birmingham in a first phase (due to complete in 2026) and then Birmingham to Leeds and Manchester in a second phase (due to complete in 2033). HS2 is expected to be part-funded by the private sector.