Season 10 - The second round of fundraising

Episode 3 - Q1 2022 - the choice of ROSCO

Romain Payet — Of the five ROSCOs which entered phase two of the roadshow, only two are still in the race when phase three begins, and they will visit our manufacturer's factories in Eastern Europe. The first is a well-known non-European company and the second is from Europe and was involved in the Midnight Trains adventure well before this roadshow, as one of our contacts introduced us to the director. From the start, they showed interest in our project, and approach to night trains. They put one of their experts onto our file, and got him to explore our model, and to assist and support us in its improvement. We’ve developed a real relationship with this team, and its members have been our sparring partners for a long time. So it’s no surprise that they’re part of the shortlist.

So we’ve got to organise two trips - one for each team. Except, we won’t do things like those who came before us. We have to explain to the manufacturer that there will be two visits and that one ROSCO should not speak to the other, and vice versa. The manufacturer won’t like that, as he wants his money and to start making our trains.

He’s used to there being only one financier, often a public authority, who hands him a check and gives him a deadline. But in the end, things get sorted as we have converging interests. This manufacturer didn’t get on board with Midnight Trains just for the contract. It’s also aiming to diversify its client portfolio and target certain markets in Europe.

Each of the teams goes on site and carries out a huge audit, which lasts several days. The engineers evaluate the factory, different workshops, construction methods, manufacturer's ability to deliver the trains on time, selection of suppliers, compliance with safety standards, ESG (Environmental, Social and Governance) standards, etc. They sift through every last detail. It’s an investigation of every possible facet of our trains, which of course, is a stressful process for us. We chose this manufacturer carefully, but it’s not one of the Western giants in the sector. Fortunately, both ROSCOs validate the assets. Both of them declare that if these trains see the light of day, they will be well produced, well built and within a reasonable time frame. So they’re ready to buy the assets, under certain conditions.

ROSCOs approach matters as if they were investing in real estate. Now that they have verified that the walls of the building are solid, they must ensure that the tenant can pay the rent. But the tenant is us and not a big rail freight company. Rather than checking whether Midnight Trains can operate, they’re banking on the fact that we will go bankrupt at some point. And that they will then have to replace the rolling stock they purchased for us from another company. They will need a new tenant for this beautiful apartment. But on this subject, they differ. The rolling stock reallocation time estimated by the European company is three times longer than that estimated by its non-European counterpart. However, to protect ourselves from potential problems, there’s a simple solution: ask us to pay the rent in advance for this potential period. The difference between the two proposals is several million euros, so it’s far from trivial.

Despite our proximity to the European ROSCO, we chose the non-European one. But obviously, it’s not enough just to buy us the first two trains for our first line. It requires guarantees, but also the certainty that the locomotives and train paths are secure, that the operational plan is solid, and we’re capable of setting up an efficient team. We need to prove we have the funds for all that, including the launch of this first line. Which, of course, will require overcoming some obstacles.

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