HSH Nordbank finances Luxury Trains in China

HSH Nordbank takes leading role as Original Senior Lender with project financing of 30 million USD for three custom-made luxury trains Tangula Luxury Trains – to operate on the Beijing – Lhasa and Beijing – Lijiang routes – will open Western China’s tourist attractions to the luxury travel market.

Singapur, February 26, 2008 - HSH Nordbank AG closed a project financing of 30 million USD for RailPartners. The maturity of the facility is 8.5 years. Total project volume is 140 million USD, with 45 million to be financed by the shareholders of RailPartners and 95 million to be financed by the project financing. The shareholders of RailPartners include Shanghai based TZG Holdings Limited, an experienced company focused on China’s leisure sector, Wing On Travel, Hong Kong’s largest travel agency, and PYI Corporation, a Hong Kong based company focused on the infrastructure and logistics sector.

“This unique Tangula transaction underlines our expertise in financing complex transportation and logistics projects”, said Peter Rieck, Deputy Chairman of HSH Nordbank. “However, the commitment and experience of the parties involved was also central for us when we entered this transaction.”

To realize the project, RailPartners has entered into a 50-year Joint-Venture with the state-owned Qinghai-Tibet Railway Corp., which is under the supervision of the Chinese Ministry of Railways. The Qinghai-Tibet railway was completed in December 2006.

The Tangula rail cars are locally manufactured in China by BSP, the Canadian based leading transport manufacturer Bombardier’s joint venture in China. Each of the three trains will be equipped with 12 sleeper cars, two dining cars and a lounge car. For hospitality management and marketing of the trains, RailPartners has entered into an agreement with Kempinski, one of Europe’s oldest and most established five-star hotel groups. The regular schedule of the Tangula train is to start in September 2008, shortly after the end of the Olympic Games in China.

With 49.6 million foreign visitors, China is the largest tourism market in Asia and one of its fastest growing. By 2016, China’s tourism market is expected to exceed USD 1 trillion, according to the World Travel and Tourism Council. However, while the western provinces and Tibet have significant potential as tourist destinations, the infrastructure for luxury tourism is still to be developed. Tangula Luxury Trains aims to bridge this market gap by opening parts of Western China en route to Tibet and Yunnan Province to up-scale travelers. One of the highlights of the three to four day journey – depending on the direction – is the route across the Tibetan plateau with the Tangula Pass station at 5,072 meters above sea level, making it the world’s highest railway track.

“Tangula Luxury Trains is a fascinating project in the specialised, but fast growing, luxury train market. In Asia, this market has significant potential”, said Mathis Shinnick, Global Head of Transportation. “Critical success factors for luxury trains are an exotic destination with difficult access for high-end travelers and the operation in a low-cost, but service-oriented environment.” General long term trends for rail investments in industrializing Asian countries are favorable due to growing trade and urbanization, combined with decades of underinvestment and the limited capacity of alternative transport modes. However, challenges for financings in these markets are significant as well, as budget and political constraints make projects often not feasible.

HSH Nordbank has been engaged in financing the railway market since 1994. With long-term sector expertise being won in Europe and the Americas, the focus has now grown to include Asia. Our clients involve the whole value chain of the rail segment including private railway operators, state railways, public transport authorities, rolling stock manufacturers, sub-suppliers, leasing firms and rail logistic providers.