Freight and logistics services provider Grindrod Freight Services partnered with infrastructure investment company Pembani-Remgro-Infrastructure Fund to form Mauritius-based rolling stock leasing company GPR Leasing Africa, in January.

Financial institution Rand Merchant Bank (RMB) was appointed as the mandated lead arranger and funder of the new entity. “GPR Leasing came to market with a request for proposal in September 2013, to which RMB responded on a competitive basis. It was a great appointment for RMB, which involved a lot of work from a financing point of view in the initial stages,” says RMB dealmaker Greg McKenzie.

He adds that GPR Leasing has successfully concluded five locomotive leasing agreements in several African countries, including South Africa, Mozambique, Zambia and Zimbabwe.

Several of the locomotives are running on the north-south rail concession NLPI, which was purchased by Grindrod late last year and links Zambia and Zimbabwe to South Africa’s ports in Durban and Richards Bay, as well as Maputo in Mozambique.

McKenzie explains that, while the leasing agreements are mostly the same, there are slight differences to ensure that both GPR Leasing and its clients are protected. “Although the leasing agreements are governed by common terms and agreements, there are slight nuances, as the clients might operate in different jurisdictions, which have different security and legal requirements to South Africa.”

He notes that GPR Leasing was initially provided finance of $50-million, based on the number of opportunities that were made apparent. He says, however, that the initial funding will not be sufficient for GPR Leasing as demand for its services increase.

“It was a complex set of terms we provided GPR Leasing, which set out the basis on which the funding would be made available. As more opportunities have come up, we have had to look at each on its own merits and use part of the funding accordingly.

“We are already looking at increased financial exposure. In our role as mandated lead arranger, we have been approached by various financial institutions and development institutions, which have expressed interest in providing funding to GPR Leasing,” he adds, noting that having more than one funder will improve GPR Leasing’s competitiveness and will also provide more exposure to banking groups.

McKenzie points out that RMB is engaging with financial institution Standard Bank, which has been a major funder to the Grindrod group and has also funded standalone locomotive transactions for the group.

“The idea is that GPR Leasing wanted to bring in some of those standalone transactions into the company to give it more capacity, therefore, making sense to include Standard Bank as a financier,” he explains.

Pretoria-based locomotive manufacturer RRL Grindrod is supplying GPR Leasing with locomotives. “RRL Grindrod’s clients that require a locomotive on lease will be referred to GPR Leasing, who will then conclude the contract to purchase the locomotives from RRL Grindrod. GPR Leasing will then release the locomotive to the client,” explains McKenzie.

He concludes that wagons should be added to GPR Leasing’s offering in the near future; however, they are likely to be imported from countries such as India or China, owing to their capacity and ability to manufacture quickly.