Trinity Industries, Inc. Announces Successful Refinancing of Outstanding Debt for Partially-owned Lease Subsidiaries and Provides Liquidity Update

Rhea-AI Summary

Trinity Industries (NYSE: TRN) announced a major refinancing plan for its subsidiaries TRIP Rail Holdings and RIV 2013 Rail Holdings, involving over $1.2 billion in debt. The refinancing will reduce annual interest expenses by approximately $25 million to $30 million, leveraging historically low rates. Notably, Trinity will become the first North American railcar lessor to issue green bonds under its Green Financing Framework. The refinancing process is expected to close around June 15, 2021, and will also lead to a reduction in the cost of debt by 50 basis points.

Positive

• Refinancing over $1.2 billion in debt at historically low interest rates.
• Expected annual interest expense reduction of $25 million to $30 million.
• First railcar lessor in North America to issue green bonds.

Negative

• Company will incur approximately $12 million in costs related to redemption premiums and unamortized loan costs.

Trinity Industries, Inc. (NYSE:TRN) (“Trinity” or the “Company”) announced today that its partially-owned lease subsidiaries TRIP Rail Holdings LLC (“TRIP Holdings”) and RIV 2013 Rail Holdings LLC (“RIV 2013”) have entered into agreements to refinance over $1.2 billion in outstanding debt. Proceeds from the newly issued debt will be used to fully repay and redeem existing notes and fund expenses related to the refinancing.

“We are pleased to announce the refinancing of the partially-owned lease subsidiaries’ capital structure,” said Eric Marchetto, EVP and Chief Financial Officer of Trinity. “The significance of refinancing over $1 billion in debt at historically low interest rates speaks to the attractiveness of the asset class and the depth of the capital markets for high-performing rail securitizations. We are also proud to be the first railcar lessor in North America to issue green bonds under Trinity’s leasing company Green Financing Framework, garnering new participation in the securitizations from firms with various ESG and sustainability mandates. These refinancings are part of Trinity’s strategic initiatives to improve our returns and drive shareholder value through lowering our cost of capital, and will result in the reduction of the Company’s cost of debt by 50 basis points. Trinity is the leading issuer of asset-back railcar securitizations, and this was an important financing for Trinity and our investment partners.”

As part of the refinancing, Trinity Rail Leasing 2012 LLC (“TRL 2012”), a subsidiary of RIV 2013, will be renamed TRP 2021 LLC ("TRP 2021"). TRP 2021 will issue an aggregate principal amount of $355 million of green secured railcar equipment notes at a blended coupon of approximately 2.13% and a weighted average life of approximately 5.5 years at closing. The transaction will have a loan to value of 73.5% and will be secured by 6,350 railcars and their associated operating leases. Upon closing, the proceeds are expected to redeem the TRL 2012 secured railcar equipment notes which had $349 million outstanding at March 31, 2021 and carried a 3.59% interest rate.

TRIP Rail Master Funding LLC (“TRMF”), a subsidiary of TRIP Holdings, will be renamed Triumph Rail LLC ("Triumph"). Triumph will also issue an aggregate principal amount of $560 million of green secured railcar equipment notes at a blended coupon of approximately 2.20% and a weighted average life of approximately 5.3 years at closing. The transaction will have a loan to value of 74.8% and will be secured by 11,004 railcars and their associated operating leases. Additionally, TRIP Railcar Co., LLC, another subsidiary of TRIP Holdings, has entered into a term loan agreement, and is expected to draw down approximately $330 million from its loan facility that will bear interest at LIBOR (or an alternate base rate) plus a facility margin of 1.85%. Together upon closing, the proceeds are expected to redeem TRMF’s secured railcar equipment notes, which had $877 million outstanding at March 31, 2021 and carried a blended average interest rate of 5.14%.

Both securitizations and the associated term loan agreement are expected to close and fund on or about June 15, 2021. Collectively, the Company maintains a 38% ownership in the partially-owned subsidiaries, and the associated refinancings are expected to reduce interest expense by approximately $25 million to 30 million on an annualized basis. During the second quarter, the Company will incur approximately $12 million in costs related to redemption premiums and unamortized loan costs associated with the outstanding debt.

Liquidity Update

As of March 31, 2021, Trinity’s income tax receivable balance was $441 million primarily due to the effects of the change in tax loss carryback provisions in the CARES Act. Today the Company announced the receipt of a $207 million income tax refund associated with the tax loss carryback for the 2019 tax year.

About Trinity Industries

Trinity Industries, Inc., headquartered in Dallas, Texas, owns businesses that are leading providers of rail transportation products and services in North America. Our rail-related businesses market their railcar products and services under the trade name TrinityRail^®. The TrinityRail platform provides railcar leasing and management services, as well as railcar manufacturing, maintenance and modifications. Trinity also owns businesses engaged in the manufacture of products used on the nation’s roadways and in traffic control. Trinity reports its financial results in three principal business segments: the Railcar Leasing and Management Services Group, the Rail Products Group, and All Other. For more information, visit: www.trin.net.

Some statements in this release, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Trinity's estimates, expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements, including, but not limited to, future financial and operating performance, future opportunities and any other statements regarding events or developments that Trinity believes or anticipates will or may occur in the future, including the potential financial and operational impacts of the COVID-19 pandemic. Trinity uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “projected,” “outlook,” and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this release, and Trinity expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Trinity’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by federal securities laws. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations, including but not limited to risks and uncertainties regarding economic, competitive, governmental, and technological factors affecting Trinity’s operations, markets, products, services and prices, and such forward-looking statements are not guarantees of future performance. In particular, the closing of the transactions described in this release are subject to general market and other conditions, which in turn are subject to a broad range of risks and uncertainties that could affect the Company, and there are no assurances that the transactions will be completed when expected or at all. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” and “Forward-Looking Statements” in Trinity’s Annual Report on Form 10-K for the most recent fiscal year, as may be revised and updated by Trinity’s Quarterly Reports on Form 10-Q, and Trinity’s Current Reports on Form 8-K.

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FAQ

What is Trinity Industries' refinancing plan announced on June 1, 2021?

Trinity Industries announced refinancing over $1.2 billion in outstanding debt for its subsidiaries TRIP Rail Holdings and RIV 2013 Rail Holdings.

How much annual interest expense will Trinity Industries save from the refinancing?

Trinity Industries expects to reduce its annual interest expense by approximately $25 million to $30 million.

What is significant about Trinity Industries' green bonds?

Trinity will become the first North American railcar lessor to issue green bonds under its Green Financing Framework.

When is the refinancing transaction for Trinity Industries expected to close?

The refinancing transaction is expected to close and fund on or about June 15, 2021.