KKR & Co. LP is planning to support a European train leasing venture to tap the liberalization of rail traffic in the region. The new company European Locomotive Leasing, which is based in Germany and Austria, made a deal for the acquisition of 50 Vectron electrical locomotives from Siemens AG. The price of the agreement is estimated to about 200 million euros.
Between 60% and 70% of the acquisition will be financed with debt funds, and the rest will be provided in the form of equity by KKRs infrastructure fund, which is estimated to about 1 billion dollars. The company announced in its statement that the first locomotives are expected to be delivered immediately.
As reported by the Financial Times, the head of KKRs investment division – Mr. Vincent Policard said: “This share will continue to grow with the market in general as the European Union encourages freight on rail to reduce pollution with the construction of new transport corridors.”
This announcement comes at a time when it became clear that KKR & Co. and Apollo Global Management LLC reported that their investments may be influenced by regulators pressing banks to focus on risky lending by imposing strict standards on leveraged loans.
Both companies made filings saying that regulatory guidelines may restrict the amount of loans the companies can access. This, on the other hand, might make them raise the amount of own money used for acquisitions, which could hurt returns.
One of the partners in Paul Hastings LLP – Richard Farley said in a telephone interview for Bloomberg that the guidelines may “disproportionately affect the private-equity firms because the amount of leverage they can take on has a direct effect on their equity returns.”
KKR & Co. LP rose by 1.38% by 14:53 GMT in New York to $22.85 per share, marking a one-year change of +18.27%. The company is valued at $15.61 billion. According to the Financial Times, the 12 analysts offering 12 month price targets for KKR & Co. L.P. have a median target of $28.00, with a high estimate of $32.00 and a low estimate of $25.00. The median estimate represents a 24.22% increase from the previous close of $22.54.
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