HSBC in talks to offload a third of UK's rolling stock

A TEAM of City investors is close to snapping up a third of the UK's trains in a deal worth £1.7 billion, it was reported yesterday.

HSBC is in exclusive talks with investment firms 3i, Morgan Stanley Infrastructure and Star Capital over the sale of its rolling-stock leasing business, according to a Sunday newspaper report.

The business, HSBC Rail, is one of three rolling-stock companies created and sold off when the rail industry was privatised in 1994. It has a fleet of 4,000 trains including the Intercity 225 trains that run between London and Edinburgh as well as Javelin high-speed commuter trains operating between London and Kent.

The consortium has been granted a period of exclusivity to finalise the deal, which is expected to be clinched by the end of the month, according to the report.

The sale of HSBC Trains would mean that all three of the rolling stock companies will have changed hands in the past two years.

In 2008, Royal Bank of Scotland struck a 3.6bn deal to sell the UK's biggest train leasing company, Angel Trains, in a doomed bid to shore up its finances just months before the financial crisis struck and the bank needed a multi-billion-pound taxpayer rescue. Later that year, Spanish bank Santander - which owns Abbey, Alliance & Leicester and Bradford & Bingley - sold another rolling-stock leasing firm to a consortium of investors including Deutsche Bank and Lloyds TSB.

Rolling-stock leasing companies have faced a lengthy probe by the Competition Commission, which found competition hampered by technical hurdles as well as the limited alternative fleets available to train operating companies when bidding for rail franchises.

HSBC was unavailable for comment.