Case 37
National Railroad Passenger
Corporation ("Amtrak"):
Acela Financing
On April 30, 1999, Arlene' Friner. CFO of Amtrak, instructed her treasury staff to review a leventged-lezise proposal from BNY Capital Funding LLC (BNYCF). Several weeks earlier, Amtrak and its adviser, Babcock & Brown Financial Corporation, had invited financial institutions to submit lease-financing proposals for Amtrak's planned purchase of locomotives and high-speed train sets.' The equipment would be utilized on the "Acela" line, Amtrak's new brand that was designed to differentiate Amtrak passenger trains and service in the Northeast Corridor.from the existing sery ice.2 Acela, scheduled to begin service in late 1999, promised to offer faster trip times and premium service (Exhibit 1).
Friner and her staff had gone over the proposals and agreed that BNYCF was among those that offered the best terms. Now, she had to decide whether Amtrak should finance the equipment purchases using BNYCF's leveraged-lease proposal or borrow money and purchase the equipment on its own.
Company Background
In 1970, the U.S. Congress created the National Railroad Passenger Corporation (Amtrak) to ensure that "modern, efficient intercity plissenger-rail service would
S.. remain an integral part of the national transportation system."3 The government mandated Amtrak to take over the rail-passenger operations of private railroads. Since then, Amtrak had become the primary provider of passenger-rail service in the United States. Amtrak's national network provided service to more than 20 million intercity passengers and operated 516 stations in 44 states.
Historically, Amtrak had received annual subsidies from the federal government. In 1997, however, Congress passed the Amtrak Reform and Accountability Act (ARAA), which stipulated that Amtrak eliminate its reliance on federal subsidies by 2002. After 2002, no federal funds could be used for Amtrak's operating expenses. This represented a formidable challenge, as
Corporation ("Amtrak"):
Acela Financing
On April 30, 1999, Arlene' Friner. CFO of Amtrak, instructed her treasury staff to review a leventged-lezise proposal from BNY Capital Funding LLC (BNYCF). Several weeks earlier, Amtrak and its adviser, Babcock & Brown Financial Corporation, had invited financial institutions to submit lease-financing proposals for Amtrak's planned purchase of locomotives and high-speed train sets.' The equipment would be utilized on the "Acela" line, Amtrak's new brand that was designed to differentiate Amtrak passenger trains and service in the Northeast Corridor.from the existing sery ice.2 Acela, scheduled to begin service in late 1999, promised to offer faster trip times and premium service (Exhibit 1).
Friner and her staff had gone over the proposals and agreed that BNYCF was among those that offered the best terms. Now, she had to decide whether Amtrak should finance the equipment purchases using BNYCF's leveraged-lease proposal or borrow money and purchase the equipment on its own.
Company Background
In 1970, the U.S. Congress created the National Railroad Passenger Corporation (Amtrak) to ensure that "modern, efficient intercity plissenger-rail service would
S.. remain an integral part of the national transportation system."3 The government mandated Amtrak to take over the rail-passenger operations of private railroads. Since then, Amtrak had become the primary provider of passenger-rail service in the United States. Amtrak's national network provided service to more than 20 million intercity passengers and operated 516 stations in 44 states.
Historically, Amtrak had received annual subsidies from the federal government. In 1997, however, Congress passed the Amtrak Reform and Accountability Act (ARAA), which stipulated that Amtrak eliminate its reliance on federal subsidies by 2002. After 2002, no federal funds could be used for Amtrak's operating expenses. This represented a formidable challenge, as