RBS sells rolling stock company to Babcock & Brown for £3.5bn

Royal Bank of Scotland has sold Angel Trains to a consortium led by Babcock & Brown's European infrastructure fund in a deal that values the rolling-stock leasing business at £3.5bn.

The long-awaited deal is the latest step in RBS's efforts to shore up its capital base, and follows the record £12bn rights issue completed on Monday.

The Angel Trains sale will give RBS a profit of between £250m and £300m, which will go to its capital reserves.

RBS put Angel Trains up for sale in September as part of a move to dispose of non-core assets following its successful bid for the Dutch investment bank ABN Amro. It has since sold its European consumer finance business to Santander and is trying to raise up to £7bn for its insurance business, which includes Direct Line and Churchill. In total, the bank expects to raise about £4bn of capital from asset sales this year.

Cazenove analysts said the sale was "a small disposal but welcome, in our view, as the first by RBS as part of its plan to raise £4bn of capital", adding that the price achieved was slightly above its expectations.

Sir Fred Goodwin, RBS's chief executive, has played down expectations of an imminent sale of the insurance business, which is expected in months rather than weeks. The sale of ABN Amro's stake in Saudi Hollandi Bank is also set to take some time.

Angel Trains, the biggest of Britain's three train-leasing companies, was formed by the UK government in 1994 as part of the privatisation of British Rail and was bought by RBS in 1997. It supplies about 4,100 passenger-train vehicles and 280 freight locomotives to UK rail operators including South West Trains and Virgin and has operations in 11 Continental European countries.

The buyer, Babcock & Brown, the Australian asset manager, faces pressure to sell some of its own assets to ward off a review of its debt rating. The consortium, which also includes Deutsche Bank, borrowed £2.8bn to finance the deal. RBS was one of the 17 banks that provided the funding.

Simon Gray, the head of European infrastructure acquisitions for Babcock & Brown, said the European infrastructure fund "is in no way affected by what is going on [at the asset manager] in Sydney".

Babcock & Brown, whose shares lost more than half their value this week, will have more than A$9bn (£4.3bn) invested in rail assets worldwide when the Angel Trains deal completes by the end of this year.