UPDATE 3-RBS to sell Angel Trains to Babcock team for $7 bln

Fri Jun 13, 2008 9:23am EDT

(Releads, updates shares)

By Denny Thomas and Marc Roca

SYDNEY/LONDON, June 13 (Reuters) - Royal Bank of Scotland (RBS) (RBS.L) bolstered its finances on Friday with the sale of UK leasing firm Angel Trains to a fund managed by Australia's Babcock & Brown BNB.AX for $7 billion, including debt.

Babcock & Brown's European Infrastructure Fund, which is leading the purchasing consortium, said the deal would be unaffected by a plunge in shares of Babcock & Brown BNB.AX amid concerns about its debt and ability to raise funds. [ID:nSYD81668]

RBS is raising money to strengthen its balance sheet after buying part of Dutch bank ABN AMRO last year and after writedowns. Britain's second-biggest bank raised 12 billion pounds ($23.5 billion) this week in the biggest ever rights issue, and is also looking to sell its insurance business.

The Angel Trains sale price is slightly above the 3.5 billion tipped by some analysts and should boost RBS's capital by 250 million to 300 million pounds.

By 1319 GMT RBS shares were up 3 percent at 236 pence, helped also by Britain's financial watchdog saying it would impose disclosure rules on short-selling. [ID:nL13231661]

"I believe it is one of the largest acquisitions in Europe in the last few months and probably since the problems in the credit markets started last summer," Babcock & Brown head of European infrastructure Simon Gray told reporters on a conference call.

The consortium buying Angel Trains, which was selected as preferred bidder in February, also includes Deutsche Bank (DBKGn.DE), AMP Capital Investors and Australian superfunds advised by Access Capital Advisers.

"The investment in the consortium is being made by Babcock & Brown European Infrastructure Fund, an un-listed private fund that is entirely separate from the Australian listed group, so it's in no way affected by what is going on with Babcock and Brown's share price in Sydney," Gray added.

UK, EU RAIL GROWTH

Angel Trains has more than 40 percent of the railway rolling stock leasing market in Britain and more than 5,300 vehicles across Europe. It was formed in 1994 from the privatisation of British Rail.

The UK business is viewed as generating stable cashflow, and has attracted interest from banks and infrastructure investors.

"The business has a very strong future due to the backdrop of continued rail growth in the UK and explosive growth in Europe," Gray said.

He highlighted that the UK Department of Transport (DoT) has issued guidance on expanding rolling stock to cope with overcrowding in some lines and that the European market is opening up to private companies for both freight and passengers, driven by the EU Open Access Directive.

Babcock & Brown, which traditionally has bought smaller assets than its Australian rival Macquarie Group Ltd (MQG.AX), already owns European train leasing company CB Rail.

Babcock buys global infrastructure assets, such as ports and power plants and bundles them into funds to earn management fees. It manages about A$72 billion in assets.

The company advised the consortium and also arranged long- term financing of over 2.8 billion pounds, while RBS was advised by Lazard.

"Debt has been placed with a club of 17 lenders from around the world," Gray said. "We bought in a large number of institutions to eliminate the costs and uncertainties of underwriting in the current marketplace." (Additional reporting by Steve Slater and Mark Potter; Editing by Louise Ireland)

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