Nordbank finances luxury train in China

HSH Nordbank is providing financing with a maturity of 8.5 years for three custom-made trains that will run over the worldÆs highest railway.
HSH Nordbank has announced the closing of a $30 million project financing for three custom-made luxury trains to run over the highest railway in the world between Beijing and Llahsa, and also between Beijing and Lijiang in Yunnan province.

The 8.5ûyear financing in which HSH Nordbank is original senior lender is for RailPartners whose shareholders include: Shanghai-based TZG Partners, an investment company focused on ChinaÆs leisure sector; Wing On Travel, Hong KongÆs largest travel agency; and PYI Corporation, a Hong Kong-based company focused on the infrastructure and logistics sector.

RailPartners has entered into a 50-year joint venture with the state-owned Qinghai-Tibet Railway Corporation, which is under the supervision of the Chinese Ministry of Railways.

Financing for the trains, known as Tangula luxury trains, totals $140 million with $45 million raised by RailPartners and $95 million by project financing arranged by Societe Generale as mandated lead arranger. HSH NordbankÆs $30 million represents the largest portion of this project financing.

ôThis unique Tangula transaction underlines our expertise in financing complex transportation and logistics projects,ö said Peter Rieck, deputy chairman of HSH Nordbank. ôHowever, the commitment and experience of the parties involved was also central for us when we entered this transaction,ö he added

The Tangula rail cars are locally manufactured in China by BSP, a joint venture between the Canadian-based transport manufacturer Bombardier and its Chinese partners. Each of the three trains will be equipped with 12 sleeper cars, two dining cars and a lounge car, and will accommodate up to 96 passengers in 48 spacious suites. The suites will feature an ensuite bathroom with shower, mini bar and in-room entertainment system with music, TV and satellite internet. A butler is on call throughout the journey, while a doctor is available during the ascent to Llhasa. Tickets are expected to be priced at about $5,000 per head compared with $50-$150 for the regular service.

For hospitality management and marketing of the trains, RailPartners has entered into an agreement with Kempinski, one of EuropeÆs oldest and most established five-star hotel groups.

The service is scheduled to start operations 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, ChinaÆs tourism market is expected to exceed $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. The new luxury train service aims to bridge this market gap by opening parts of Western China en route to Tibet and Yunnan Province to up-scale travellers.

The regular train service between Beijing and Lhasa that has been in operation since July 2006 takes almost 48 hours. But the luxury trains will take five days and four nights with stops along the way to visit tourist attractions.

Similarly the Beijing to Lijiang route takes five days/four nights and runs through in the landscapes of Guangxi and Yunnan provinces.

ôTangula luxury trains is a fascinating project in the specialised, but fast growing, luxury train market. In Asia, this market has significant potentialö, said Mathis Shinnick, global head of transportation for HSH Nordbank.

ôCritical 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,ö he added.

General long term trends for rail investments in industrialising Asian countries are favourable due to growing trade and urbanisation, 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 budgetary and political constraints can often make projects unfeasible, HSH Nordbank said in a statement.
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