Napier Park Global Capital, the $6.8 billion hedge fund spun out of Citigroup Inc., is investing $362 million in a railcar leasing venture, betting on an industry favored by billionaires Carl Icahn and Warren Buffett.
Napier Park is forming a partnership with Trinity Industries Inc. (TRN) to acquire about $1 billion of railcars by the end of 2014, according to a statement. Napier Park also will provide financing to a second entity that owns an additional 14,455 cars, Dallas-based Trinity said yesterday.
Demand for new rolling stock to carry railroads’ rising crude-oil shipments is benefiting Buffett and Icahn. Buffett’s Berkshire Hathaway Inc. owns railcar maker Union Tank Car Co., while Icahn controls 56 percent of manufacturer American Railcar Industries Inc. (ARII)
New drilling technology is unleashing crude from difficult-to-reach rock formations, sending U.S. oil production to records. Carriers such as Berkshire’s Burlington Northern Santa Fe LLC are carrying more crude to refineries from fields beyond the reach of existing pipelines.
Trinity captured 61 percent of first-quarter North American railcar orders, Michael Baudendistel, an analyst at Stifel Nicolaus & Co. in Baltimore, wrote in a May 2 note to clients.
Trinity climbed 19 percent this year to $42.52 through yesterday, compared with a 17 percent gain for the Standard & Poor’s Midcap Industrials Index. Saint Charles, Missouri-based American Railcar gained 14 percent in 2013.
Railcar manufacturing is Trinity’s largest business, accounting for $2 billion of the company’s $3.81 billion in 2012 revenue. The leasing unit was the third-biggest segment last year, behind the inland barge group, at $647 million.