September 2020 – Not only cargo, but also passenger rail transport was hit hard by the lockdown in spring and the resulting major economic slump. The coronavirus crisis may have temporarily brought the traffic turnaround to a standstill, but in the long term the course remains set for "change" As an experienced specialist financier, Hamburg Commercial Bank remains loyal to the transport industry and sees numerous financing opportunities, both now and in future.
If the industry leader isn't feeling well, the situation must really be serious. "Deutsche Bahn Loses Billions in Coronavirus Crisis" – headlines like this were popping up in the German media a few weeks ago. Empty trains in Germany and difficulties with foreign business have driven Deutsche Bahn deep into the red. Newspapers reported that the state-owned company posted a loss of 3.7 billion euros for the period between January and June, naming supervisory board members as sources. In January and February, Deutsche Bahn reported record passenger numbers following a fare reduction.
"The rail market worldwide has been severely affected by the Covid-19 crisis," says Inka Klinger, Global Head of Infrastructure Project Finance at Hamburg Commercial Bank. However, she also says that the impact varies considerably from sector to sector. "Financing has been delayed, as recently was the case with VTG, and it has become more expensive as well. Cargo is much more dependent on economic cycles than passenger transport – and surprisingly it has in general been less severely affected by the crisis," says Klinger. Covid-19 has shown how quickly risk assessments can change. By contrast, passenger transport was hit hard – for instance Deutsche Bahn, which had to send out nearly empty trains in order to meet political pressure to maintain basic services.
But what happens now? Will the numerous private railways recover from the crisis? "I can say one thing for sure: HCOB will be sticking to its strategy as a specialist financier. We continue to be involved in the rail market as a reliable partner with a financing volume of more than one billion euros," assures Inka Klinger. Her view of the rail market's future is optimistic. "We expect a continued clear commitment to rail transport in Europe and a very high demand for new assets. Regional passenger transport is and will remain a subsidized business. Since regional public transport is an essential service, it will without doubt return to normal operation as quickly as possible once the measures are eased," says Jun Qian, Senior Vice President Infrastructure & Rail at Hamburg Commercial Bank. In particular, she places great hope in the economic stimulus packages provided by the European governments.
But will fear of infection keep passengers from using the railways to the same extent as before the crisis? Private passenger transport by car is booming, and many employees continue to work from home or will commute to work much less frequently than in the past, which is likely to reduce the number of daily rail commuters.
On the other hand, Inka Klinger notes, "Rail travel has become established as a fast and convenient means of transport. We expect passenger numbers to return to pre-Covid-19 levels. International supply chains in the logistics industry have been disrupted. There are interruptions and losses in intra-European cargo transport, and at the same time goods are being redistributed from ship to rail."
It is not currently possible to say with certainty what all of these developments will mean for cargo and passenger transport in the long term. "In any case, the operators are more severely affected than the rolling stock lessors, who have long-term leasing contracts. In some cases, rent cuts or rental holidays are being negotiated to cushion the existential effects of the crisis," says Qian.
Hamburg Commercial Bank supports companies that were already successful before the pandemic. "Private rolling stock lessors are the primary drivers of new construction investment in the European rail market. Over the next few years, we expect private financing in Europe of two to three billion euros per year for investments in locomotives, trains and wagons," says Klinger. At the same time, the European states are talking about plans for massive investments in the railway infrastructure: Germany has committed itself to a comprehensive 86 billion-euro investment program for modernization by 2030; Italy plans to invest 58 billion euros by 2023 alone. As Klinger says, "Rolling stock will remain a sought-after asset class for investors, banks and institutional investors in the coming years."
The Hamburg Commercial Bank team will continue to support promising transactions in the market with their experience and expertise in finding suitable solutions. HCOB has a broad network of investors in equity and debt capital, which it has built up over many years of cooperation with renowned infrastructure funds such as Arcus, AMP and JP Morgan.