Greenbrier Transitions to a Subscription Business Model
New leasing strategy appears similar to the SaaS model used in the technology sector.
April 8, 2021
The Greenbrier Companies (GBX), a railroad freight car manufacturer, has plans to insulate itself from the often unpredictable railcar order and delivery cycle. In a 10-Q for the quarter ending February 28, 2021, Greenbrier revealed details of its new leasing strategy:
“In February 2021 we announced a refined leasing strategy to grow our owned portfolio of leased railcars built by Greenbrier by approximately $200 million per year. This will create an incremental annuity stream of tax-advantaged cash flows while reducing our exposure to the new railcar order and delivery cycle.”
The strategy will be executed through a new joint venture of which Greenbrier owns more than ninety-percent. The modified leasing strategy began in March 2021— after closing a $300 million non-recourse warehouse facility— and instantly achieved 65% of Greenbrier’s annual goal:
“...the conclusion of the initial sale and contribution of railcars and associated leases by Greenbrier valued at approximately $130 million.”
Initially, Greenbrier’s leasing JV will be financed with non-recourse debt levered at approximately 3:1 debt to equity. Ultimately, the JV will obtain permanent financing once it aggregates enough leased railcars to issue asset backed securities. If Greenbrier is successful, our analysis indicates the company will transition approximately 8% of its annual revenue into subscriptions per year. The JV will be headed by a former SVP at Trinity Industries, a competitor of Greenbrier’s, who built Trinity’s leased railcar portfolio to $10 billion.
Related: TRN, VOSSY, RAIL, WAB, UNP, NSC, CSX, BNI, CNR, CP
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