THE DEBT REPORT STANDING OUT AT THE TOP OF THE …Marketing Solutions Manager Hywel Grimmett +44 20...

February 2019 | infrastructureinvestor.com

FOR THE WORLD’S INFRASTRUCTURE MARKETS

THE DEBT REPORT

STANDING OUT AT THE TOP OF THE CYCLE

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EDITORIAL

1INFRASTRUCTURE INVESTOR DEBT REPORT

e: [email protected]

Managing expectationsISSN 1759-9539 FEBRUARY 2019your

global partnerin the

Infrastructure Sector

Your global partner providing solutions for a changing world

As an industry leader and an award winning industry expert our global coverage in the infrastructure sector enables us to work in close collaboration with our partners

to help them achieve their strategic objectives.

www.ca-cib.com

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THEY SAY it’s lonely at the top, but it’s certainly not lonely at the top of the cycle. Not only that, but, as our p. 18 roundtable participants found, the crowd doesn’t really speak with one voice.

“The issue we find is there's a lot of appetite for long-term, boring infrastructure debt, but not at the yields the market offers at the moment, certainly not from

a European perspective,” says Aviva Investors’ Darryl Murphy. That’s just one example. On eve-rything from fund structures to

risk appetite, there is signifi-cant divergence for managers to contend with. All at a time when the global economy may be about to turn, adding pres-sure on participants to stay dis-ciplined.

That, in a nutshell, is where the infrastructure debt market is today. But don’t let that get you down – there is

a lot to be glad about. Infrastruc-ture debt is now an established asset class, with managers steadily grow-ing their assets under management. To acknowledge and celebrate that, we’ve started our first infrastruc-ture debt ranking – the Infrastruc-ture Investor Debt 10 – bringing you the 10 largest managers in the asset class today. Find out who they are on p. 8.

Dealflow is also healthy across the globe, with Murphy walking us through the asset class’s key mar-kets and the opportunities they

offer, on p. 6. M&G’s John Mayhew, on p. 28, tells interested investors where to find relative value, while Schroders’ Charles Dupont and Claire Smith explain, on p. 16, why infrastructure debt is a good bet as we near the top of the market. On p. 24, we highlight five risks – from lighter covenants, to nascent sec-tors and tricky jurisdictions – you should watch out for.

Infrastructure debt has always been a resilient asset class, and as our p. 26 sample of S&P’s annual study shows, defaults continue to be relatively rare. The good news is that the asset class is about to get even more resilient, with lim-ited partners pressing managers to show they are serious about ESG. For some investors, like those in the Nordics, ESG is a deal breaker; for others, like those in the US, it’s more of a work in progress. Differ-ing speeds aside, it’s very much on the agenda. Read about it on p. 30.

Speaking of differences, Asian investors are particularly keen on the asset class, representing a major source of capital for many of the managers in this report. But while GPs will find a willing audience, they shouldn’t assume their needs are homogenous. That’s the story we tell on p. 32, detailing the dif-ferences between Japanese and Korean LPs.

Enjoy the report,

Bruno Alves

EDITOR’S LETTER

BRUNO ALVESINFRASTRUCTURE INVESTOR SENIOR EDITOR

On everything from fund structures to strategies there is significant divergence for managers to contend with”

The Debt Report

Infrastucture Investor

4. Two-minute round-up Our top debt stories from 2018

6. Four markets to watch out for in 2019 With uncertainty unlikely to disappear and signs that a market correction may be upon us, Aviva Investors’ head of infrastructure debt Darryl Murphy zeroes in on where dealflow can be found

8. Meet the world’s 10 largest debt managers As infrastructure debt continues its steady growth, fundraising among the asset class’s most elite firms nears $60bn

16. Why infra debt is a good bet as we near the top of the market Charles Dupont and Claire Smith, from Schroders, discuss the importance of disciplined deal sourcing, the rise of junior debt and why Brexit could herald exciting opportunities

18. Roundtable: Where next for infrastructure debt? There’s a wealth of interest in the asset class but leverage creep, differing expectations and the spectre of a downturn are creating challenges, six industry experts tell Zak Bentley

24. Keep calm and stay disciplined Risks are increasing as the late stage of the credit cycle hits and fund managers broaden their horizons. Eduard Fernández looks at the five main issues

26. Shock resistant A taster of S&P Global Rating’s 2017 Inaugural Infrastructure Default Study And Rating Transitions shows how resilient infrastructure debt is

28. In search of relative value John Mayhew, head of infrastructure debt at M&G, explains why it is important to maintain investment discipline at this point in the cycle, in order to preserve returns over the long term

30. Wanted: ESG credentials Vehicles operating in the space are increasingly targeting sustainable projects due to LP demand and goals set by the United Nations, writes Rebecca Szkutak

32. Asian investors are ‘hungry for returns’ Japanese and Korean investors are looking to new strategies for higher returns, finds Eduard Fernández, but the two countries have very different attitudes to risk

34. Annus horribilis With only $3.3bn raised by five closed-ended funds, 2018 was the worst fundraising year since 2013. As mandates gain in popularity, are investors falling out of love with debt funds?

36. Year in review A look back at some notable quotes on the ups and downs of the global debt market

For Institutional investors only. For information only. 1 Source: INREV/ANREV Fund Manager Survey – May 2018. Rankings based on non-listed direct real estate assets under management. Picture for illustrative purposes only. Design & Production: Internal Design Agency (IDA) | January 2019 | 20-9917 | Photo Credit: Gettyimages

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4 INFRASTRUCTURE INVESTOR

NEWS

DEBT REPORT

Two-minute round-upA YEAR IN INFRA DEBT

BROOKFIELD CLOSES FIRST INFRA DEBT FUND AT $885MBrookfield Asset Management held a final close at $885 million on its infrastructure debt vehicle.

The Brookfield Infrastructure Debt Fund I was launched in June 2016 with a $700 million target and had raised $283.5 million by June 2017 according to a regulatory filing.

The vehicle is Brookfield’s first focusing on infrastruc-ture debt. It focuses on mezzanine debt investments in core infrastructure assets, primarily in North America, but will also invest in South America, Australia and Europe.

Brookfield said the fund’s investors represent a diverse group of institutions including pension funds and financial groups.

EDMOND DE ROTHSCHILD TARGETS UP TO €750M WITH NEW FUNDFrench asset management group Edmond de Rothschild launched the latest instalment of its BRIDGE infrastructure debt platform, looking to raise between €500 million and €750 million from European investors.

BRIDGE IV consists of two sub-funds, one of which is designed to specifically target deals in the energy transition space. BRIDGE IV Senior Energy Transition has a target of €500 million and is accompanied by BRIDGE IV Higher Yield, designed to secure greater returns with a smaller target of €250 million.

The Higher Yield vehicle is looking to secure returns of between 5 and 7 percent, while Senior Energy Transition targets 200 basis points-plus over base rate.

BNP PARIBAS PLANS NORTH AND LATIN AMERICA INFRA DEBT STRATEGYBNP Paribas Asset Management will expand its platform to North and Latin America, Infrastructure Investor learnt.

Karen Azoulay, head of infrastructure debt at BNP Paribas AM, stressed the launch was not directly linked to President Trump’s focus on infrastructure, but more the growth of the market across the continent and BNP’s status as a global player.

In addition to energy, BNP would consider deals in telecoms, data centres and battery storage. Transactions related to the latter are already being studied by the group and Azoulay explained that BNP could bring an extra dimension to the US core infrastructure market, which is largely financed by municipal bonds.

JAN 2018 MAR 2018 JUN 2018 JUL 2018

DEFINITIONS ‘SLOWING GROWTH OF THE STRATEGY’Debates about what constitutes infrastructure are “slowing the growth of the infrastructure debt market”, Alexander Waller, head of infrastructure debt at Whitehelm Capital, said.

Speaking at Infrastructure Investor’s Global Summit in Berlin, Waller said that definitions of infrastructure “can’t just be driven by [the] sector” an asset falls into. Whitehelm has previously invested in Sydney and Heathrow airports, but would decline to define airports elsewhere as infra-structure, he explained.

“It might be infrastructure at six times leverage but not at nine times leverage,” he added.


NEWS

WESTBOURNE CAPITAL HITS $1.5BN FIRST CLOSE ON LATEST INFRA DEBT RAISEMelbourne-based Westbourne Capital has reached a first close on $1.5 billion for its latest infrastructure debt plat-form, managing director David Ridley told Infrastructure Investor.

The infra debt funds manager, which celebrated its 10th anniversary in 2018, aims to raise $3 billion in the current round of fundraising and has secured several commitments and re-ups from existing LPs.

Around 45 percent of the funds raised so far has come from pensions, 40 percent from sovereign wealth funds, and 15 percent from insurance clients, with the split 70-30 in favour of non-Australian clients.

Westbourne aims to complete fundraising for the plat-form by the end of 2018 and will deploy capital over the subsequent three years, in line with its previous fundrais-ings. While declining to name specific assets, Ridley said deployment will target opportunities in the transportation, utilities, energy and telecommunications sectors in OECD countries.

MIZUHO TO LAUNCH NEW VEHICLE Mizuho Global Alternative Investments, now Asset Manage-ment One Alternative Investments, a Tokyo-based financial gatekeeper and fund manager, is aiming to raise between $500 million and $1 billion for its second infrastructure debt fund, a source told Infrastructure Investor.

The new vehicle is mainly aimed at Japanese investors, and the fundraise will last one to two years, the source said.

The fund will be going up the risk curve, targeting senior debt for both greenfield and brownfield projects in investment-grade countries, and in developing markets through credit enhancement. It will have an investment period of five years.

Mizuho launched its first yen-denominated infrastruc-ture debt fund, Cosmic Blue PF Trust Lily, in 2016.

EIFFEL CLOSES ‘INNOVATIVE’ ENERGY TRANSITION BRIDGE DEBT FUND ON €350M French asset manager Eiffel Investment Group closed the first bridge debt fund for renewable energy projects above target on €350 million.

The Eiffel Energy Transition Fund was originally launched in 2017 with a €200 million target but the demand has “been much more than expected”, Pierre-Antoine Machelon, manager of the fund, told Infrastructure Investor.

The 10-year fund provides short-term pre-construction debt to renewable-energy and energy-efficiency projects across Europe, having already invested €233 million to date. The fund’s debt is redeemed once long-term financi-ers come in its place.

Machelon said investors should expect returns of about 5 percent, adding that, despite the greenfield nature of the fund, institutional investors were attracted by its risk-reward nature.

SEP 2018 OCT 2018 NOV 2018 DEC 2018

LEGAL & GENERAL HIRES HSBC DIRECTOR Legal & General Investment Management has hired HSBC’s infrastructure and real estate director Will Devenney for its infrastructure debt team.

Devenney’s arrival follows a three-year tenure at HSBC, preceded by a 10-year spell at RBC Capital Markets, bringing more than a decade of experience working on advisory, structuring and underwriting deals across the transportation, utilities and renewables sectors. Devenney spent the final five years at RBC as vice-president, then director of infrastructure acquisition and leverage finance.

LGIM said Devenney has joined as part of plans to expand its infrastructure debt team and broaden its investment opportunities, focusing on “yield-enhancing strategies”.

6 INFRASTRUCTURE INVESTOR DEBT REPORT

MARKETS

With uncertainty unlikely to disappear and signs that a market correction may be upon us, Aviva Investors head of infrastructure debt Darryl Murphy zeroes in on where deaflow can be found

Four key markets to watch in 2019

UK: MORE THAN JUST THE ‘B’ WORDThe UK market performed strongly in 2018, primarily due to large financings in the offshore wind sector that accounted for around 40 percent of the £36 billion ($45.9 billion; €40.1 billion) of completed deals. However, beyond corporate transactions in public markets, acquisition financings and refinancings of legacy PPP projects, there was a low level of greenfield financ-ing activity.

The political debate over the delivery of major infrastructure projects remains active given the lengthy delay to Crossrail and the cost over-runs facing Transport for London on this publicly funded project.

TfL is likely to remain in the spotlight through two key infrastructure transac-tions; the sale and leaseback of Crossrail rolling stock and the £1 billion Silvertown Tunnel. This is effectively a PPP project

which, after a lengthy procurement pro-cess, is scheduled to close this summer. Two bidding consortia remain, testing both appetite for complex construction risk and the health of the credit market.

Somewhat ironically given the govern-ment’s announcement on PPP, the Welsh mutual investment model starts in 2019 with the procurement of the A465 road project, although that is not likely to reach financial close until next year.

In energy, offshore wind deal activity will likely be lower than in 2018 but should remain in the spotlight with the third Con-tracts for Difference auction taking place in May. This is likely to see strike prices below £56 per MWh for delivery in 2023-24, putting pressure on developers to continue cutting supply-chain costs and risk allow-ances while trying to predict interest rates, inflation, currency and the cost of credit in what is set to be a volatile economic period.

Another emerging trend is the role of nuclear. The government is due to announce if it will consider the financing of Sizewell C, a proposed nuclear power sta-tion in Suffolk, via the regulated asset base model, as used on the Thames Tideway Tunnel project. This could present a major opportunity for infrastructure investors for a project of this magnitude, with financial close targeted for 2021.

The UK offshore transmission market, however, remains the only true pipeline of projects in procurement. This year should see the close of the Galloper and Walney projects and the procurement of Rampion, followed by the start of Round 6. This will be watched closely as the licence period is extended by five years to 25 years and the financing requirement increases, which may require a revised approach to the cur-rent procurement of financing.

Rail faces an important year with the publication of the Williams Review, but the main source of activity will likely remain in rolling stock with the Southeastern, East Midland and West Coast franchises in competition.

PPP in its broadest form will remain an option, although activity is likely to be more focused on refinancings. The use of a PPP-type structure is also likely to feature in the regulated utility sector. Examples include the Direct Procurement for Customer model in the water and onshore transmission sectors to replace Ofgem’s Competitively Awarded Transmis-sion Operator model. These concepts are likely to result in limited opportunities for investors, however.

TfL: in the spotlight for two major projects


MARKETS

NORTH AMERICA: FUELLED BY ENERGYCanada saw deal activity of around C$47 billion ($35.2 billion; €30.7 billion), with PPP representing 14 percent of the total. The remainder was heavily influenced by oil and gas/pipeline activity.

The Canadian market looks set to generate similar volumes in 2019, with the use of PPPs focused in Ontario and selectively in other provinces. The emergence of the Canadian Infrastructure Bank is a potentially significant development, with its focus on financing projects through the private sector rather than taxpayers. The coming year will be important for this new entity now it is fully operational, although the federal election may impact activity given it has enjoyed direct support from the Trudeau administration.

The US remains the largest infrastructure debt market globally at $150 billion, with the bulk of activity coming from liquefied natural gas, oil and gas and corpo-rate energy financings. PPPs accounted for less than four per cent of deals last year, with the one major transaction being the $1.6bn LAX People Mover in Los Angeles.

REST OF THE WORLD: AUSTRALIA RULESAustralia remains at the forefront of activity in the rest of the world, accounting for $41 billion of the $139 billion total. The level of activity looks set to continue due to the breadth of investment activity in energy, mining, LNG, PPP and privatisations. There continues to be interest from long-term institutional investors in what has historically been a market driven by shorter-term, commercial bank loans.

Elsewhere, Latin America has generated consistent activity – around $40 billion in 2018 – aided by appetite among domestic investors in Chile, Colombia and Peru. This has offset lower investment in the Middle East and North America, which saw $12 billion of deals in 2018. That was almost matched by the $11 billion of transactions in sub-Saharan Africa, albeit this is a region driven by sizeable investments by multilateral development banks. n

EUROPE: A FOCUS ON RENEWABLESDeal activity declined in Europe last year, with just over €100 billion of deals compared with €122 billion in 2017, even though the values were inflated by large corporate acquisition financings, such as the Spanish toll-road operator Abertis.

Activity was evenly spread across the region, a trend set to continue with limited PPP programmes. Road projects will continue in the Netherlands, Germany and Norway, but the main focus will continue to be on renewables, including offshore wind schemes in north-west Europe.

Spain firmly re-emerged in 2018 with healthy acquisition and refinancing flows, although the promise of a major new road PPP programme did not transpire due to the change in government.

Primary financings represented only 15 percent of the overall market last year, with Turkey the main contributor. The lack of greenfield opportunities is likely to continue, with a greater focus on acquisition opportunities, including Orsted’s regulated busi-ness in Denmark and the sale of part of Groupe ADP. Investors are therefore likely to continue to push into the core-plus area with associated debt opportunities in the investment-grade crossover market.

Norway: expected to see some road activity alongside Germany and the Netherlands

Oil and gas: the lion's share of the pipeline in North America

Renewables: part of the energy story Down Under

Important note: Issued by AMP Capital Investors Limited (ABN 59 001 777 591) (AFSL 232497). General information only. Before making any investment decision, please seek your own advice. © Copyright 2016 AMP Capital Investors Limited. All rights reserved.

Thinking ahead of the market has always been an important part of what we do. We have more than 70 years of experience managing investments, being one of the first investors in infrastructure in the 1980s.

Thinking wide isn’t just about finding great ideas. It’s also about implementing them with strong judgment and discipline. We take our responsibilities and our clients’ trust very seriously.

We bring our clients the benefit of the whole picture – not just part of it.

www.ampcapital.com

We are one of the world’s most experienced infrastructure investors.

We offer a range of investment strategies to meet investors’ needs.

Meet the world’s 10 largest debt managersAs infrastructure debt continues its steady growth, fundraising among the asset class’s most elite firms nears $60bn

We’ve been publishing our equity rank-ing – the Infrastructure Investor 50 – for years, so this year, we’ve decided to recognise infrastructure debt’s growing

importance to investors by creating our first ranking for it: the Infrastructure Investor Debt 10.

Why only a top 10? We wanted to start small and sharpen minds for our debut. As you can see from the table below, you need circa $1.65 billion of assets under management to make it into our ranking and $11.48 billion to claim the top spot, occupied by EIG

Global Energy Partners, with BlackRock nipping at its heels with $10.26 billion. You’ll find a plethora of other well-known names on the ranking, with European-head-quartered managers well-represented on it.

A quick note on methodology: the ranking focuses on capital raised from 1 January 2013 to 31 August 2018, setting up the stage to measure fundrais-ing on a rolling five-year basis, like the II 50. It counts unlisted funds, separate accounts and co-investment capital and cuts across strategies, including senior and junior debt.

Rank Firm name Headquarters Capital raised ($m)

1 EIG Global Energy Partners US 11,482.06

2 BlackRock US 10,261.49

3 Macquarie Infrastructure Debt Investment Solutions UK 7,183.45

4 AXA Investment Managers - Real Assets France 6,943.38

5 AMP Capital Australia 5,450.00

6 Westbourne Capital Australia 5,351.00

7 Allianz Global Investors Germany 5,323.70

8 Rivage Investment France 4,297.94

9 Edmond de Rothschild Asset Management France 1,900.00

10 UBS Asset Management Switzerland 1,653.42

The IID 10 ranking is based on the amount of direct infrastructure debt investment capital raised by firms between 1 January 2013 and

31 August 2018. Where two firms have raised the same amount of capital over this time period, the higher IID 10 rank goes to the firm

with the largest active pool of capital raised since 2013 (ie, the biggest single fund). Full methodology at www.infrastructureinvestor.com

Important note: Issued by AMP Capital Investors Limited (ABN 59 001 777 591) (AFSL 232497). General information only. Before making any investment decision, please seek your own advice. © Copyright 2016 AMP Capital Investors Limited. All rights reserved.

Thinking ahead of the market has always been an important part of what we do. We have more than 70 years of experience managing investments, being one of the first investors in infrastructure in the 1980s.

Thinking wide isn’t just about finding great ideas. It’s also about implementing them with strong judgment and discipline. We take our responsibilities and our clients’ trust very seriously.

We bring our clients the benefit of the whole picture – not just part of it.

www.ampcapital.com

We are one of the world’s most experienced infrastructure investors.

We offer a range of investment strategies to meet investors’ needs.

10

IID 10

INFRASTRUCTURE INVESTOR DEBT REPORT

1 EIG Global Energy Partners$11.48bnHQ: US

Leading out of the gate for the inaugural Infrastruc-ture Investor Debt 10 is EIG Global Energy Partners, a US firm, which has raised a total of $11.48 billion in infrastructure debt commitments.

The firm not only raised one of the largest funds ever in the sector, collecting $6.6 billion for EIG Energy Fund XVI, but it did so in 2013 before the infrastructure debt market had matured to the point it has today.

Headquartered in Washington DC, EIG is one of the market’s premier investors in oil and gas, midstream, infrastructure, power and renewables. The firm is cur-rently raising the next instalment of its EIG Energy Fund strategy, with $1.85 billion in commitments col-lected since entering the market in August 2017.

Aside from leading the infrastructure debt market in terms of fundraising, EIG has made co-investments and separate accounts a large part of its strategy. It has raised $1.75 billion in these categories since 2013, with the lion’s share, $1.2 billion, coming from separately managed accounts.

Energy: EIG has established itself as a market-leading infrastructure debt investor, focusing on energy sector co-investments and separate accounts

The world’s top asset manager finished runner-up in this ranking, but it’s clear where BlackRock has set its sights.

A survey by the New York-based firm published in Janu-ary 2019 makes clear institutional investors want more debt exposure – to real assets in particular. Raising $10.26 billion in infrastructure debt commitments is a good start, but the firm is poised to grow.

BlackRock raised $9.28 billion in separate accounts between 2013 and 2018, $2 billion of which it raised in the last three years.

But now the firm is establishing a pooled fund strat-egy for infrastructure debt. In May 2017, it closed the BlackRock Colombia Infrastructure Debt Fund on $280 million. It has also raised $701 million so far for its flag-ship Global Infrastructure Debt Fund.

Only $1 billion behind first place, and $2 billion ahead of third place, BlackRock seems to have solidified its spot near the top.

2 BlackRock$10.26bnHQ: US

Demand: BlackRock finds investors want greater exposure to infra debt and aims to deliver through separate accounts and pooled vehicles

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one_Infrastructure Investor_0121_4n.pdf 1 2019/01/21 17:39


IID 10

With Macquarie Infrastructure & Real Assets monopo-lising the number one spot in our II 50 equity ranking, perhaps it’s no surprise that another Macquarie subsidiary – Macquarie Infrastructure Debt Investment Solutions – has managed to claim the third spot in our Debt 10 list.

Since its launch in early 2012 and its first mandate of $500 million, Macquarie’s debt asset management busi-ness has deployed approximately £4 billion ($5.1 billion; €4.5 billion) across the infrastructure spectrum, includ-ing the financing of 4.5GW of clean power generation. Having raised and fully deployed Macquarie Infrastruc-ture Debt Fund 1, a £829 million UK-inflation-linked vehi-cle, MIDIS is currently in the process of raising MIDF2, which according to Infrastructure Investor data has so far collected £110 million.

While MIDIS’s co-founders, James Wilson and Andrew Robertson stepped down last June, handing the reins to their colleagues, Kit Hamilton and Tim Humphrey, they “remain closely involved with [the] business”, according to Macquarie.Renewables: MIDIS has financed 4.5GW of clean energy across its debt investment business

3Macquarie Infrastructure Debt Investment Solutions$7.18bnHQ: UK

4AXA Investment Managers – Real Assets $6.94bnHQ: France

AXA Investment Managers’ Real Assets launched its infrastructure debt platform in 2013. It has raised €1.2 billion for its maiden infrastructure debt fund and col-lected another €4.3 billion across four separate accounts to debut at number four in our ranking.

According to Bertrand Loubières, its head of infra-structure finance, the firm has invested around €6 billion over 58 transactions across Europe. At the end of 2018, AXA European Infra Senior I was 80 percent deployed.

The firm has its eyes on Australia and Japan. In May, Infrastructure Investor reported AXA IM – Real Assets had made its first debt investment in Japan, in a solar PV project in Okayama prefecture. “We are very keen to become a global player on the infrastructure debt side,” said Laurent Jacquemin, head of Asia-Pacific, as it looks to expand beyond Europe, leveraging the expertise it gains from investing in debt to transition into equity. Asia-Pacific: the firm is looking beyond Europe, setting its sights on Australia and Japan


5AMP Capital$5.45bnHQ: Australia

6Westbourne Capital$5.35bnHQ: Australia

The first of two Australian firms in our top 10, Sydney-headquartered AMP Capital has found a lot of joy in fundraising for its infrastructure debt strategy, headed by global head of infrastructure debt Andrew Jones.

AMP Capital has raised $5.45 billion during the five-year period covered by our ranking, with the third fund in its debt series, Infrastructure Debt Fund III, reaching a final close on its $2.5 billion hard-cap in August 2017. The vehicle is a 10-year closed-ended fund that has invested in assets including Invenergy Clean Power and Peel Ports, and has been making investments in other energy and telecommunications assets.

Reinforcing its success in the space, the firm secured two separate co-invest-ment pools of $800 million each alongside that third debt fund, which launched less than a year after the $1.1 billion close of its predecessor. Jones told us then that the capital was there for further debt fun-draisings, and with AMP Capital’s strong track record, expect them to be at the forefront of this in Australia and the Asia-Pacific region.

Just behind the other Australian firm in this list, Melbourne-based Westbourne Capital celebrated its 10th anniversary in 2018 after spinning out of Hastings Funds Management just before the global finan-cial crisis, expanding on the latter’s pio-neering work in the asset class.

Westbourne has subsequently raised more than $5.3 billion over the last five years and is well on the way to raising $3 billion more for its latest infrastructure debt platform, reaching a first close of $1.5 billion in September 2018.

Recent deals include providing A$160 million ($115 million; €101 million) of mezzanine debt financing for the Lincoln Gap Wind Farm project in South Australia, only the firm’s second foray into renewa-bles, while also backing Long-Term Asset Partners’ mysterious take-private bid for Australian agricultural giant GrainCorp to the tune of A$400 million, perhaps signal-ling a shift away from its traditional pure infrastructure investments.

Westbourne has been a major player in infrastructure debt for the past decade and that looks set to continue for the next 10 years.

Fundraising: the Australian manager hit its $2.5bn hard-cap for Infrastructure Debt Fund III

Wind: Westbourne’s financing of the Lincoln Gap project is the firm’s second foray into renewables

The German insurer last year completed its 50th infrastructure debt deal, marking over €11.1 billion invested in the asset class worldwide since 2012 (for the purposes of this ranking, we’re only counting the third-party money it manages).

While the group has launched two UK-focused funds, the bulk of its funds raised comes through SMAs in Europe and the UK. However, the US remains the largest recipient of its investments, with 22 percent of its dealflow directed towards the country, as at June 2018, with France and the UK attracting 18 percent and 15 percent respec-tively. Yet Allianz has also been active in less established markets, completing its fourth investment in Latin America with a Peruvian wind farm deal, while also making a land-mark investment of close to €100 million in the Emerging Africa Infrastructure Fund.

A pioneer in financing projects in emerg-ing markets, Allianz announced in 2016 it would make an investment of $500 million alongside the International Finance Corpo-ration in emerging markets worldwide, a debt provision previously only offered by international development institutions, local banks and some international banks.

7Allianz Global Investors$5.32bnHQ: Germany

US: The country remains the largest recipient of the Allianz strategy

IID 10

14

IID 10

INFRASTRUCTURE INVESTOR DEBT REPORT

When the family behind the name has been involved in infrastructure financing since the 19th century – taking in flagship projects like the Suez Canal – you know Edmond de Rothschild Asset Management is not short on pedigree.

Flash-forward to more contemporane-ous times and you find a very successful private infrastructure debt strategy, cen-tred on EdR’s BRIDGE platform. Started in 2014 and comprising a suite of funds, the platform had quadrupled its AUM since inception, with €1.4 billion invested across 28 assets, as of late 2018.

At that point, EdR also hit a first close on more than €250 million for its fourth infra-structure vehicle. The latter is split into two sub-funds, one of which is designed to specifically target energy transition deals. BRIDGE IV Senior Energy Transition has a target of €500 million, looking to gen-erate 200 basis points-plus over base rate, while BRIDGE IV Higher Yield is designed to secure returns of 5-7 percent, with a smaller target of €250 million.

As of June, EdR said its previous debt funds were 90 percent deployed, invest-ing in 25 assets for a total of €1.15 billion.

Last, but certainly not least, especially when you consider how recent its debt strategy is, with UBS closing its first €750 million fund closed in 2016. Its second debt vehicle has just hit its €1 billion hard-cap, with a 70 percent re-up rate, but given our 31 August 2018 cut-off date, not all of it is being counted towards this ranking.

Debt as a strategy is particularly impor-tant to UBS, playing a pivotal role in the customer re-alignment infrastructure boss Tommaso Albanese describes on p. 16 of our main issue. Laser-focused on senior-secured, low-risk, regulatory-friendly investments, UBS is making the most of the spread gap created by QE in Europe, delivering gross returns of around 4 per-cent to its investors.

With the requisite hiring done to allow for an expansion into the US debt market, market, after Perry Offutt joined to lead the firm’s North American business, it will be interesting to see if the manager will keep its focus on senior debt, or start to take its first steps down the capital stack into more subordinated positions.

8Rivage Investments$4.30bnHQ: France

Offshore wind: Rivage has completed over 30 investments in several European countries

9Edmond de Rothschild Asset Management$1.90bnHQ: France

One of three Paris-based managers in our ranking dealing only in infrastructure debt, Rivage Investments is in the middle of that French mini-league. It began its programme strongly in 2013 and closed two funds in the final months of that year, garnering more than $500 million.

The firm has since gone on to raise a further eight funds, the largest of which closed in 2017 on more than $800 million. Its infrastructure debt division has been co-headed by Arnaud Sérougne and Severin Hiller since 2014.

Rivage has completed over 30 invest-ments in several European countries through its funds since it began investing in France. The firm typically targets long-term senior debt with ticket sizes ranging from €10 million to €100 million, although it has also provided mezzanine debt.

Investments include greenfield financ-ing for offshore wind. At the outset, the group’s strategy focused on investments mainly in France, Germany and Benelux, but it has also provided debt to investments such as an LNG power facility in Malta.

Strategy: BRIDGE IV Senior Energy Transition has a target of €500 million for energy transition deals

10UBS Asset Management$1.65bnHQ: Switzerland

US: In the past year, the Swiss firm has been expanding its team in the country


Q What makes infrastructure debt an attractive space right now?

CS: Investors are starting to think about what assets they would want in their port-folios if we were to enter a downturn. Debt obviously has the benefit of contractual cashflows and greater protections than equity. We have seen spreads compress across the entire market, however, infra-structure debt continues to offer attrac-tive spreads relative to more liquid asset classes. It also offers a better recovery rate and better default experience.

Investors are searching for yield at the moment and, in my mind, infrastructure debt is an asset class where you can attract an increased return – not for increased credit risk, but rather for lower liquidity. If investors are happy to have that illiquidity in their portfolio, it’s a good risk-return trade-off.

Q How would you describe investor demand for the asset

class?CS: I have certainly noticed a change. A lot of clients that have previously only invested in infrastructure equity are now looking to complement their allocations with debt. We are definitely seeing more interest.

The traditional buyers of infrastructure debt have always been insurance compa-nies because they get the capital benefits in terms of Solvency II. However, we are now seeing a wider range of investors outside insurance looking at the asset class as a risk diversifier and as a complement to their equity portfolios.

Charles Dupont and Claire Smith, from Schroders, discuss the importance of disciplined deal sourcing, the rise of junior debt and why Brexit could herald exciting opportunities

Why infra debt is a good bet as we near the top of the market

INVESTING

We are approaching the top of the market and so investors are considering more defensive strategies” Dupont

CD: I think it is partly a consequence of where we are in the cycle. We are approach-ing the top of the market and so investors are considering more defensive strategies. But it is also about the growing maturity of the asset class. Infrastructure debt has become mainstream and more conservative investors can see there are now a number of large and solid players, like us, leading and structuring the infrastructure debt market.

Q Given that increased investor appetite, just how frothy is

the market becoming and how are managers evolving strategies to preserve returns?CS: I think we are still seeing sufficient high-quality opportunities for asset manag-ers, but you have to be a lot more selective about the deals you do. We have invested in less than 9 percent of the deals we have screened in the infrastructure debt space to date.

We see transactions in the market with a high level of construction risk but with-out pre-payment protection, or pricing we don’t think is reflective of the risk. It is certainly much more difficult to source good opportunities but I think where you have a clear edge, for example speed of execution, you can still make it work. You just have to avoid the busy parts of the market – the parts that everyone under-stands – and seek out opportunities where there is still good value.

In some ways, it is easier to check you are achieving adequate value in debt mar-kets than in equity markets because you have very clear benchmarks when you are pricing debt. You have listed corporate bonds, listed infrastructure bonds, gov-ernment debt and the high-yield market to compare against. When you are pricing debt you can be clear about whether you are getting value above what you would get in more liquid markets. It is far harder to judge value in the equity market, where in current fund offerings a significant com-ponent of the value results from capital


INVESTING

gain and you don’t know what price you are going to get on exit. I think that is a great deal more challenging.

Q What is your approach to origination?

CD: There are plenty of opportunities in every sector and every geography. There is a strong need for debt to help bridge the infrastructure-financing gap everywhere, but strong demand attracts a lot of lenders of different nature, including infrastruc-ture debt investors. What ultimately makes the difference for borrowers and sponsors is your reputation, your track record, your experience in these sectors and geogra-phies, the way you are perceived.

Starting from a long list of around 20, lenders are usually whittled down to a shortlist of just three or four. To make that shortlist, it is important to be one of the market leaders.CS: I would add that it is not just the reputation of the lending institution that counts, it is very much about the individu-als. Individuals in this market need to be known for making quick decisions, sticking with those decisions, knowing the market and being reliable to work with.

Q To what extent has the infrastructure debt market been

affected by Brexit?CS: Brexit could create great opportuni-ties for lending in the UK, particularly if you have sterling liabilities. On the whole, investors aren’t worried about UK infra-structure itself underperforming after Brexit, they are only concerned about currency.

If you have sterling liabilities and can find sterling-denominated assets, thereby insulating yourself from currency risk, you will likely benefit from less foreign money competing for deals while foreign currency investors wait out Brexit.

If the European Investment Bank isn’t lending anymore, once the UK is out of the EU, that should also push up spreads

in the market, which would be valuable for UK investors lending on home turf.

Q What about rising interest rates? What impact is that having?

CS: We are starting to see some investors having more of a preference for floating-rate debt, particularly in the junior space, so that they can benefit from rising rates.CD: But we continue to see a strong inter-est in fixed rates, especially from insurance companies where demand is also driven by liability management considerations.

QThere is growing demand for junior debt in the infrastructure

space. What is driving that and what are the advantages?CS: Our junior debt product is a fixed-income solution, and not a quasi-equity solution. It provides investors with the same access to high-quality infrastructure debt assets, with financial covenants and solid security packages, and with higher yields than in the senior space. At present, it is particularly attractive and relatively uncrowded in light of Basel III and Sol-vency II regulations pushing banks and insurance companies towards the senior investment-grade space.

It is an interesting niche because inves-

tors pick up quite a big increase in return for what has historically proved to be a very modest increase in risk. There is still a bit of education to be done, given investors aren’t as familiar with this part of the market, but demand is growing as awareness grows.

Supply is also increasing because infra-structure equity sponsors are using this type of junior debt to add more leverage, in order to increase their IRR, as equity multiples are rising.

Q There are junior debt specialists, but Schroders invests across

the capital structure. What are the advantages?CS: The benefit of being able to invest across the capital structure is that you can provide options to investors depending on their risk-return preferences, or the regula-tory regime they are operating under.

We are even seeing some investors cre-ating blended combinations of our senior and junior debt funds to create a specific risk-return profile that suits their needs. We are seeing blended strategies in order to get the right mix of duration, the right mix of fixed- and floating-rate assets, the right risk-return profile – and being able to invest across the capital structure allows us to offer that flexibility to create tailored solutions. CD: If you only have a single product to offer, you have to offer that product even if the market has shifted. If you have a wide range of products, you are more flex-ible and better able to adapt to changing market conditions. We believe that this is ultimately beneficial to investors and aligns interests over the long term.

In addition, infrastructure gathers a wide range of risks. Having investment-grade and non-investment-grade debt offerings, senior and junior debt funds, also contributes to clarifying the fund strategy for investors. We believe that greater trans-parency should foster a long and trusting relationship with investors for the long term. n

Smith: more investors look to infrastructure debt to complement their infrastructure equity portfolios


There’s a wealth of interest in the asset class but leverage creep, differing expectations and the spectre of a downturn are creating challenges, six industry experts tell Zak Bentley

Where now for infrastructure debt?

The “high point” for the debt market came with the $2.5 billion close of AMP Capi-tal’s third fund in August

2017, and we were still revelling in it at last year’s roundtable. The fourth largest fund that year, we described it as “further proof of the substantial progress made by infrastructure debt”.

Indeed, 2017 was the highest ever year for infrastructure debt fundraising, with $8.5 billion raised across 16 funds, accord-ing to Infrastructure Investor data. But, to put it lightly, in 2018 that plummeted, falling 61 percent to $3.31 billion raised across four funds.

With six industry experts gathering at Aviva Investors’ offices for our roundtable,

it’s plain to see that interest in the sector hasn’t just fallen off a cliff. But their expla-nations of what LPs want are differing and wide-ranging.

“The issue we find is there's a lot of appetite for long-term, boring infrastruc-ture debt, but not at the yields the market offers at the moment, certainly not from a European perspective,” begins Darryl

RoundtablePHOTOGRAPHY: PETER SEARLE

From left: Norman, Fox, Haight-Cheng, Tercier, Nakamura, Murphy


ROUNDTABLE

Murphy, head of infrastructure debt at Aviva. “Therefore, you're left with investors who are perhaps more attracted to strategies which have a little bit more risk and return. The challenge is people badging what are effectively high-risk products to investors who actually want very low risk, and there's a mismatch there.”

As a representative of the aforementioned “high point” of infrastructure debt, AMP Capital’s Emma Haight-Cheng offers a different perspective.

“We are seeing a good amount of appetite for our product as a mezzanine debt fund,” says the group’s director. “For investors with upwards of about $500 million, they may want more con-trol and so would look to bespoke managers to provide bespoke solutions.”

Celine Tercier, head of infrastructure finance at Ostrum Asset Management, agrees with Haight-Cheng. “We’re seeing very large investors that want to have a bespoke mandate and smaller ones who are keen to have a co-mingled fund with a quite small ticket,” she explains. “It really depends on their size, their allocation to the asset class and where they are on their investments.”

This divergence of priorities presents difficulties for fund managers to put together products that will work for everyone.

“Our experience has been that the bigger investors are able to commit significantly more capital to a segregated mandate than

Darryl Murphy, head of infrastructure debt, Aviva InvestorsMurphy is responsible for origination, structuring and execution of new infrastructure debt transactions. He joined the group in 2017 after

nearly eight years as partner at KPMG’s infrastructure advisory business. Murphy was also head of infrastructure at HSBC and has over 22 years’ experience in infrastructure finance.

Matthew Norman, global head of infrastructure, Crédit Agricole CIBNorman has over 20 years of infrastructure and energy industry experience. Before joining Crédit Agricole CIB, he worked in the investment

banking and wealth management divisions at Indosuez. He was appointed global head of infrastructure in 2016.

Emma Haight-Cheng, partner, infrastructure debt, AMP CapitalHaight-Cheng is primarily responsible for sourcing, arranging and managing infrastructure debt investments in Europe and has over 10 years of

infrastructure and energy finance and private equity experience. She joined AMP Capital in 2014 from NIBC.

Glenn Fox, head of infrastructure debt investments, HSBC Global Asset ManagementFox joined HSBC’s asset management arm in 2015 after three years managing social housing PFIs on behalf of two debt investors. He spent the previous

year at Bishopsfield Capital Partners and before that, he was chief investment officer at Hadrian’s Wall Capital.

Hironobu Nakamura, chief investment officer and head of infrastructure debt, Asset Management One Alternative InvestmentsNakamura is responsible for investment origination, fund management and operations. He manages

two infrastructure-related debt funds targeting a range of investments from senior project finance to core infrastructure projects globally. He has 20 years of experience in infrastructure-related businesses, fund management and project finance.

Celine Tercier, head of infrastructure finance, Ostrum Asset ManagementTercier became the manager of infrastructure at the Natixis asset management group when it was created in 2016. She had previously been at the

French bank for nearly eight years, in various roles in the bank’s infrastructure business. Prior to that, she was vice-president of structured finance at credit rating agency DBRS.

Investors want core and very secured infrastructure, but they want a yield that no longer exists in Europe” Tercier


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DEBT REPORT

they are to a fund,” says Glenn Fox, head of infrastructure debt at HSBC Global Asset Management. “The challenge for us is to find a strategy for a fund that has sufficient appeal to a wide enough base of investors to be scalable. I think a lot of people have found that difficult in the infrastructure debt market.”

Those challenges in the infrastructure market can, of course, lead to a stretch-ing of the boundaries of the asset class. This is a worry for Crédit Agricole CIB’s global head of infrastructure Matthew Norman.

“Certainly, for the last 12 to 24 months, I would say the growth in the pipeline is largely driven off the core-plus, hybrid sector, with an expanding sector defi-nition. I think there’s an interesting approach here for the LPs because on the one hand, this gives the industry exciting avenues to grow, such as tech-related infra-structure, but on the other, raises questions

on whether this is providing them the risk-return profile they signed up for?"

It’s this thought process that is driv-ing the mandate for Asset Management One Alternative Investments and its debt fund series, according to chief investment officer Hironobu Nakamura.

“With the definition of infrastructure debt becoming a bit broader, we want to define what precisely it is. Our fund is defined as a project finance fund. We see a lot of infrastructure debt in the market but it is a little bit of a different story. Pro-ject finance senior debt has quite a lower default rate and higher recovery rate.”

DEFINE AND CONQUERFox offers a different perspective, preferring not to focus too much on definitions.

“We don't define core infrastructure, we simply have a set of credit characteristics that we're looking for and my investment committee understand,” he says. “The

question is where one goes either on the country risk scale or credit risk scale, in order to achieve the minimum returns investors are looking for.”

The question certainly highlights the spread of viewpoints around the table, as well as the challenges infrastructure debt faces. To borrow Murphy’s earlier com-

[Asia-Pacific] has the potential to be a very interesting market and the land of opportunity” Fox

A lot of institutions are struggling with southern Europe, so the idea of going to other jurisdictions is a long way off” Murphy


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ments, “long-term, boring infrastructure debt” means different things to different managers and investors.

“We’re quite cautious when it comes to investing in developing markets,” says Norman. “Probably the closest area we'll see around developing markets would be Latin America, that’s where we do see quite a lot of demand from clients. That to me is the area where you can play the country aspect to drive return.”

That, of course, depends on who you’re in conversation with, according to Murphy.

“We talk to European investors and if you're not comfortable with Italy, then Latin America sounds like a pretty scary place,” he responds. “Latin America has better investment-grade structures than a lot of deals elsewhere, but a lot of institu-tions are struggling with southern Europe, so the idea of going to other jurisdictions is a long way off.”

Tercier believes managers may need to

diversify to deliver for investors. Echoing Murphy earlier on, she says:

“I think investors want core and very secured infrastructure, but they want a yield that no longer exists in Europe. That's why it's interesting to be flexible in order to be able to select the transactions that bring diversification to your portfolio and also the best relative value.”

Even as one of the participants who is more willing to diversify, Nakamura remains cautious about developing coun-tries and says Asset Management One would require risk assurances.

“We want to diversify as much as pos-sible, but we have to be careful about devel-oping countries,” he says. “We need some credit enhancement to cover those kinds of countries. But otherwise, we are happy to diversify as much as possible, country by country, sector by sector. As long as there is a mitigant for the country risk, we’re happy to take it.”

However, as Haight-Cheng views it, country risk doesn’t just apply to develop-ing countries, but can also be a factor in more developed countries, when it comes to pricing.

“We see a higher pricing in North Amer-ica consistently,” she explains. “I would have to put that down to the slightly less mature market than we enjoy in Europe.”

“I think there’s very different perspec-tives depending on where investors are coming from,” Fox summarises. “All of the money that we raised is in Asia-Pacific and from some very big institutions. They are used to the idea that they have to invest in US dollars because there isn't sufficient local currency liquidity. There are some investors out there who, if they get local currency, will accept a BB-rated invest-ments as the best they're going to achieve.”

CREEPING LEVERAGE At last year’s roundtable, we were told “the market has been very good at keeping con-trol of leverage creep”. However, we were warned looking ahead that it “is the next big thing”. A little over 12 months later, it’s clear that for some, this forecast has borne fruit.

“Asset pricing right now in the infra-structure sector is reaching elevated levels in some areas compared to the previous cyclical high point,” Norman asserts.

“With the definition of infrastructure debt becoming a bit broader, we want to define what precisely it is” Nakamura

22 INFRASTRUCTURE INVESTOR

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DEBT REPORT

“From a lending perspective, we have been less concerned this time around because what has driven this is more equity than debt. But certainly, we're seeing, over the last 12 months, greater use of leverage in transactions and lev-erage creeping up across the board. I think that may become a real concern, particularly when you combine that with

very weak structures, compressed pric-ing and a future cycle re-adjustment. I believe it is key to be patient and maintain discipline."

Murphy responds that while things have changed over the past year, the sector would not face the same financ-ing challenges it faced during the global financial crisis if there were another one tomorrow.

“You’re getting a fair price and cov-enant packages are not overly aggressive,” he says. “I think we’re in a world right now where sponsors choose to push all of these.”

Nakamura remains flexible on the amount of leverage, as long as it meets Asset Management One’s typical deal requirements.

“We are looking for a triangular approach. The project will have stable cashflows, a good capital structure for the leverage and a covenant or strong protection,” he says. “If a project is stable

we can afford a higher leverage. If a pro-ject is not so strong, we have to be more cautious on the leverage.”

Haight-Cheng, though, agrees with Norman. “There are a number of new entrants to the infrastructure debt sector who are not used to looking at pure infra-structure projects,” she explains. “As a result, on certain projects we have seen more aggressive leverage than we would be comfortable with and we’ve found that we’ve had to step away from a couple of processes because of that.”

Norman wonders whether actors inex-perienced in the infrastructure market are prepared for a potential downturn.

“I think that's a really interesting chal-lenge for managers and the investors,” he says. “As a bank, we've been through that, and we've been through many dips in terms of cycles, so we're prepared for it. The question for those new entrants is: are they?”

But Tercier sees new entrants backing a wealth of managers as a positive for the asset class.

“There are new investors coming to this asset class in Europe and from other geographies and from an investor per-spective, I think that they like to diversify their asset managers. They don’t want to put all their money with the same pro-vider. They need diversification in terms of asset managers and in terms of strate-gies. I think it’s a good thing to have new entrants.”

For Fox, a combination of leverage and issues with rating agencies is a bigger issue.

“One of the interesting things I observe in the market today, which is very reminiscent of 2007, is rating agency arbi-trage,” he says. “In the North American market, everything gets structured to BBB minus by one agency. It's very clear that experienced sponsors are shopping to see who will give them the required rating at the highest leverage level. I look at other markets such as Canada where I simply

We’ve found we’ve had to step away from a couple of processes because of [aggressive leverage]” Haight-Cheng


ROUNDTABLE

don't believe the ratings that come out of the market. I saw one transaction recently where the degree of operational leverage is absurd for a transaction rated in the A category.”

SEEING THINGS DIFFERENTLYFox’s reference to 2007 is a timely reminder of the warnings of another impending economic downturn. With the warnings already issued by our par-ticipants, is the sector ready for another financial slump?

“The only good thing from the crisis is if you are doing due diligence on a toll road, or a GDP-related asset like a toll road or an airport or port, you do have the data now to say whether the structure can withstand that type of shock,” argues Murphy. “That’s a much better position than previously, at least we have some empirical evidence.”

Murphy’s statement brings a nod of agreement across the table from Norman,

who highlights the sector’s strengths in the previous crisis.

“It's a good thing, rather than just theoretically coming up with numbers, you've actually experienced a live crash test,” he says. “The asset class did do gen-erally very well. It came out the other side and is actually stronger for it. The market has shown resilience through the cycle, combined with long-term fundamentals of the sector.

“One of the biggest challenges the industry faces is ever-expanding capital allocations to the sector. We’re buying and selling the same assets in certain sectors we've done for the last 10 to 15 years – that does not create a sustainable market. You need new primary infrastruc-ture investment, that’s what Europe really lacks right now. There’s a very limited tangible pipeline there currently. How-ever, we do see a very positive outlook for M&A in 2019.”

Since Fox’s playground is not Europe,

he brings a more bullish perspective to the market.

“We're developing Asia-Pacific focused mandates and there is a degree of uncer-tainty going into that market about deployment and speed of deployment,” he says.

“One can see the economic develop-ment and the growth of the middle class so we see the expansion of insurance company balance sheets and the press-ing need to invest in infrastructure. From our perspective, that looks like it has the potential to be a very interesting market and the land of opportunity.”

Elsewhere, “the ability to compete in an increasingly ESG-conscious market is more and more at the forefront of our concentration”, says Haight-Cheng.

Back in Europe, all is not lost, accord-ing to Tercier and Nakamura, who foresee an interesting secondary market on the horizon for debt investors. Both identify Basel regulations as the reason for “a quite dynamic secondary market in the project manager space”, Nakamura says, while Tercier sees this as “the next step for the banking market”.

European greenfield worries aside, there is still much to work with in infra-structure debt. n

We’re buying and selling the same assets in certain sectors we’ve done for the last 10 to 15 years – that does not create a sustainable market” Norman


RISK

Risks are increasing as the late stage of the credit cycle hits and fund managers broaden their horizons. Eduard Fernández looks at the five main challenges

Keep calm and stay disciplined

Seen as a resilient, predictable asset, infrastructure debt has grown in popularity among investors. But, as liquidity

spreads in the asset class, fund manag-ers are having a harder time capturing the right returns for their investments.

“There is a disconnect between increased demand for infrastructure debt assets and its supply. The victim of that difference has been price,” John Mayhew, head of infrastructure debt at UK-based asset manager M&G, explains to Infrastructure Investor.

As a result, the market is being slowly

transformed: managers are starting to diversify their portfolios, looking for opportunities in new markets and sec-tors. At the same time, as more capital becomes available, managers warn about being trapped on the weaker side of negotiations with arrangers and issuers, with contract terms suffering as a result.

Here are five trends market players should keep an eye on, as infrastructure debt enters a new stage.

MOVING UP THE RISK CURVEAs senior-debt returns fall, investors are starting to climb up the risk curve.

“In some cases, you do see managers engaging in riskier strategies, such as mezzanine strategies, in order to cap-ture higher returns,” says René Kassis, head of private debt at La Banque Post-ale Asset Management. “Some investors are responding positively to it,” he adds.

As spreads keep tightening, expect more managers to be attracted to the riskier options available on the debt markets.

Despite this, Kassis warns this strat-egy might not have optimal results: “The junior/mezzanine space is quite narrow, especially now that you find a

Cycles: investors need to be ready if the market turns


RISK

lot of liquidity on both the senior debt and the equity markets. You might end up taking an equity-type risk for a credit-type return.”

Junior debt is also not right for every investor. As the UBS Asset Management head of infrastructure, Tommaso Alba-nese, explains in our keynote interview (see main issue, p. 16): “Subordinated debt has higher capital requirements. If you can structure something that is senior, giving you 4 percent [returns] with a 20 percent capital requirement – instead of 40 percent [for junior debt] – you get quite a nice risk-adjusted return.”

LIGHTER COVENANTS AND TERMSThe walls are starting to cave in, espe-cially in core sectors or safer markets that are flooded with capital.

“In the last 12 months, people have been trying to take away some credit pro-tections that are fairly standard, such as reserves available for project financing, placing limitations on the amount of liquidity, or contingencies in the finan-cial model during the construction or operation of the asset,” says Mayhew.

Similarly, Asset Management One Alternative Investments, a Tokyo-based fund manager raising its second infra-structure debt fund, also warns of a relaxation of standards among some arrangers.

“Due to the high levels of liquidity, arrangers have been able to structure some so-called ‘covenant-lite’ projects, in which, for example, the threshold of cer-tain ratios is lower,” explains Jack Wang, a fund manager at the firm, stressing that those deals fall out of their investment scope.

UNCHARTED SECTORSAs more players enter the market, fund managers are increasingly looking to finance emerging infrastructure sectors with little track record. “There are sectors which are still an equity play, because

their business model has not stabilised yet, and the predictability of the cashflow is not there yet,” Kassis points out.

The manager highlights certain areas of energy transition, such as the much-discussed energy storage space, as one of those opportunities that don’t yet feel like a pure infrastructure play.

‘INFRA-LIKE’ IN THE SPOTLIGHTThe market has also seen a growing number of deals to finance businesses that label themselves as “infrastructure” because they share some of the asset class’s characteristics but that might not offer the same resilience to economic downturns as traditional sectors.

“We have seen assets financed in the leveraged loan market that then are sold to an infrastructure sponsor, and then return to the infrastructure debt market to try to get financed at a lower price,” explains Mayhew.

Faced with such situations, the advice is clear: always look at the fundamentals of the asset.

NEW (AND OLD) GEOGRAPHIESFund managers have also been pushed into exploring new markets, as the bulk of liquidity remains in the most devel-oped countries in north and western Europe.

Without naming specific geographies, Mayhew says that some managers “are going back to countries that haven’t historically behaved well in respect to infrastructure”.

“As we look at new countries, the ques-tion is whether they respect the rule of law, whether we can enforce security if it is needed,” he adds.

Kassis paints a brighter picture, explaining that some of the rising mar-kets are simply becoming attractive again after recovering from the global financial crisis. “Countries that were big sources of opportunities, such as Portugal and Spain, are back to the market after the crisis,” he says.

‘NOT ALL DOOM AND GLOOM’So, is it time to worry? Not yet, as fund managers are staying optimistic about infrastructure debt’s fortitude and good practices.

“The infrastructure debt market is built to be resilient, and I believe it will stand to its promises,” says Kassis.

As well as exploring the geographies and sectors where there is less competi-tion, some managers are taking on more complex financial structures that not all investment teams are prepared to tackle. This can reward managers with a much-needed ‘complexity premium’ for their investments.

“There are still good opportunities out there; it’s just that there are more deals you need to decline,” Mayhew from M&G argues.

And, as pressure grows on financiers, remaining cool-headed is a must: “It’s not all doom and gloom: the important thing is to maintain investment discipline,” concludes Mayhew. n

The junior/mezzanine space is quite narrow, especially now that you find a lot of liquidity on both the senior debt and the equity markets. You might end up taking an equity-type risk for a credit-type return” Kassis


A taster of S&P Global Ratings 2017 Inaugural Infrastructure Default Study And Rating Transitions shows how resilient infrastructure debt is

Shock resistant

DEFAULTS

The average recovery from a default is significantly higher when involving an infrastructure corporate

More utility and transportation assets recover than energyprojects

North America dominates rated infrastructure defaults in recent years

11

10

9

8

7

6

5

4

2

2

1

0

NO

. OF

DE

FAU

LTS

2013 2014 2015 2016 20172012

Europe Latin America North America

While transportation suffers relatively few rated defaults, the utilities sector has appeared more vulnerable

2013 2014 2015 2016 201720122011

Oil and gas Power Social Infrastructure

Transportation Utilities

8

7

6

5

4

2

2

1

0

Source: S & P Global Ratings. Note: recovery rate charts are for period 1981-2017.

80

70

60

50

40

30

20

10

0

Overallinfrastructure

Project finance

Infrastructurecorporates

Non-financialcorporates

% R

EC

OV

ER

Y R

ATE

Utility

Transportation

Oil & gas

Power

Other

0 10 20 30 40 50 60 70 80 90

% RECOVERY RATE

NO

. OF

DE

FAU

LTS

AMERICAN DREAM? DEFAULTS BY INDUSTRY

HIGHLY SALVAGEABLE INFRA'S ROAD TO RECOVERY

IT TAKES

IM GINATIONTO GO FURTHER TO

FIND VALUE

For Investment Professionals and Qualified Investors only.

This document does not constitute an offer or solicitation. The services and products provided by M&G Investment Management Limited are available only to investors who come within the category of the Professional Client as defined in the Financial Conduct Authority’s Handbook. M&G Investments is a business name of M&G Investment Management Limited and is used by other companies within the Prudential Group. M&G Investment Management Limited is registered in England and Wales under number 936683 with its registered office at Laurence Pountney Hill, London EC4R 0HH. M&G Investment Management Limited is authorised and regulated by the Financial Conduct Authority. JAN 2019 / IM1593

We understand that meeting your long-term requirements means working closely with you to find investment solutions for your specific needs – targeting the right blend of risk and return through an active value management approach that generates performance for investors.

The value of investments will fluctuate, which will cause fund prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.

www.mandg.com/institutions

IM1593_Imagine_Advert_205x270.indd 1 16/01/2019 10:08


Q Just how competitive and price-rich has the infrastructure debt

market become?JM: In some areas, such as straight-forward infrastructure corporates, the market is very competitive because it can be easily understood by a wide variety of debt investors. That has a consequent impact on pricing. From our perspective, those kinds of deals often offer little or no value for our investors.

The other thing that we sometimes observe are deals that are priced and presented as investment grade, but which we don’t see as being of the same credit quality. In effect, we see them as under-priced sub-investment grade deals. That can be another product of a frothy market.

But our investors aren’t paying us simply to invest in infrastructure. That bit is easy. Our role is to be selective, and to gain access to the asset class at good relative value.

And, while there are areas that are competitive and price-rich, there are also areas where it is still possible to find that value. Some of the funds we manage are classic, long-dated investment-grade books – absolutely. Others are high-yielding funds. We have inflation-linked strategies and we have a new floating-rate debt fund. That range gives us the ability to look across the whole market and pick and choose those opportunities that we believe offer value.

Q How do you ensure that you achieve that relative value on a

consistent basis?JM: Our key metric is investment

John Mayhew, head of infrastructure debt at M&G, explains why it is important to maintain investment discipline at this point in the cycle, in order to preserve returns over the long term

In search of relative value

INVESTING

performance, not how much we deploy. The last thing we would ever want to be is a forced investor because that is when you have to make compromises. To that end, we have a very strict sepa-ration between the team that originates and structures transactions and the fund managers.

The job of the origination and struc-turing teams is to ensure that we see the market – not only deals that come to the market as a whole, but also things that are off the beaten path. A deal may come to us pre-baked or we may have an early inkling of a deal and the origina-tion team structures and negotiates the transaction from scratch.

The investment decision is then taken by one or more fund managers who sit separately. They are the arbiters of price. Just because a deal team has worked hard on a deal doesn’t mean you should make the investment. The price has to be right. We can love a credit and think the bor-rower is a great business. But the price at which they are looking to borrow may mean that an investment makes no sense from a value perspective. That separation really helps us to maintain returns.

Q Where are you seeing that relative value?

JM: I don’t think that you can pick just one part of the market. If you look at the deals we invested in last year, they range in maturity from the shortest at six years to the longest at 46 years. They range in rating from AA to B. There was senior debt at an opco level; mezzanine debt; holdco debt; floating-rate deals; fixed-rate deals; RPI and CPI deals; sterling,

Our key metric is investment performance, not how much we deploy”


INVESTING

In recent years, we have seen a number of other businesses transition from the leveraged-loan market and try to present themselves as infrastructure”

euro and dollar. We pick deals across the full spectrum. The common theme is that we judged they offered good rela-tive value for the respective funds which invested.

Q There have been a lot of new entrants to the infrastructure

debt space. How do you expect the make-up of the industry to evolve going forward?JM: It’s an interesting question. Twenty years ago, when the private debt team here at M&G was established, there were relatively few people interested in infra-structure debt, whether fund managers or investors. If you look at the number of platforms established over the past five years, that market has certainly changed and that increased demand is impacting value.

Have we reached a peak in terms of the number of managers? Ultimately, we need to let the cycle run, and investors will see which managers have achieved their return targets without compromis-ing credit quality. Infrastructure is a long-term business and so that will take time.

We are definitely seeing some large investors pause for thought. I was speak-ing to the CIO of a very large European insurance company that has invested heavily in the sector over the past five or six years who intends to wait now until value returns. But we also continue to see new investors enter the market, particu-larly those from further afield.

Q Is political uncertainty across Europe also creating a

challenge? JM: Because infrastructure debt finances essential assets that are the backbone of the economy, whether that debt is repaid through public sector payments under concessions – so effectively general taxation – or user payments, for exam-ple through traffic tolls or water and energy bills, we clearly invest in the real

economy. That has an impact on soci-ety. There is an interface there with the public sector and there is an interface with the public.

Some countries welcome that pri-vate sector investment in infrastructure and others find it less appealing. And the view within a country can change as the political situation changes. Politi-cal uncertainty can affect the supply of projects, and the risks involved. That can affect our view on the attractiveness of one country over another or one sector over another. The challenge for us is deciding where to dedicate our time given the wide range of opportunities we see through our origination capabilities.

From a country perspective, we focus on the rule of law, ability to enforce secu-rity, stability of regulation, respect for private investors’ rights and so forth. And because we invest for the very long term, these things can change and that can be a challenge.

Q Of course, it’s not just about deploying new capital. What is

your approach to managing existing investments?JM: We spend a lot of time managing our existing investments. Given the long-term nature of the market, even those investments made by the team 20 years

ago are still being repaid. So, we talk a lot to our borrowers. And we listen to them. We also listen to our independent advisors and stakeholders, whether that be government or public sector coun-terparties.

At a transactional level, infrastructure deals tend to be highly structured. We have an array of covenants and tests and information rights and we look at that information carefully. We engage early with the borrowers. If problems arise, we can address them before they become something that can affect the credit. It is definitely a sector where you need to pay close attention to the detail.

Q It is widely understood that we are nearing the top of the cycle.

Just how do you expect infrastructure assets, and the infrastructure debt asset class, to fare in any downturn coming our way?JM: In general, I expect infrastructure debt to stand up well in a downturn. We have known, for a long time, that infrastructure assets have very strong defensive characteristics. They have the stable cashflows and low correlation to economic cycles that investors look for. We now also have a body of empirical evidence from the likes of Moody’s, S&P and EDHECInfra to support that.

But in recent years, we have seen a number of other businesses transition from the leveraged-loan market and try to present themselves as infrastructure. Interestingly, those are often companies that we have already financed through our leveraged-loan funds.

We characterise those as cashflow lending propositions rather than infra-structure. When they seek to reprice to the infrastructure debt world, we often fail to see value. How those assets will fare in a downturn I think is less clear. But I expect true infrastructure will perform well as it has done in previous downturns, most recently the financial crisis. n


ESG

Vehicles operating in the space are increasingly targeting sustainable projects due to LP demand and goals set by the United Nations, writes Rebecca Szkutak

Wanted: ESG credentials

Infrastructure debt investors are doing more than paying mere lip service to ESG.

Over the past few years, envi-ronmental, social and governance-focused investments have become an increasing target for private debt firms globally, especially those with an infra-structure focus. This is partly due to the 17 different goals the United Nations introduced in 2015 for a more sustain-able world, which included infrastruc-ture on the list.

In addition, many limited partners

are beginning to become more con-scious of where they are putting their money within the vast number of invest-ment opportunities. Due to these pres-sure points, some firms are trying to dip their toes into more ESG-focused projects.

However, this has been a priority for many firms for years, and they are delv-ing deeper into the strategy.

NN Investment Partners is one such firm, with sustainable infrastructure debt investments a key part of its strat-egy. The firm launched its debut ESG-

focused infrastructure debt fund on 15 November with a minimum target of €200 million.

Alistair Perkins, head of project finance for infrastructure debt at NN Investment Partners, told us that although this is the firm’s first so-called ESG fund, the practices are in its “DNA”.

“We want [the fund] to be a market leader and push the envelope a bit more than others have done in ESG and sus-tainability,” Perkins says.

The NN European Sustainable Infrastructure Debt Fund is expected

Driving change: investors are increasingly concerned by environmental, social and governance issues


ESG

to invest in infrastructure across social, transportation, energy, utilities and digi-tal infrastructure. The vehicle is offering senior secured loans and expects returns of between 3 and 4 percent.

Perkins said the firm uses a ratings system for its potential investments to make sure they fit its criteria for sustain-able investment.

Vantage Infrastructure takes a simi-lar approach when vetting potential investments. Tim Cable, head of infra-structure debt and senior partner at Vantage, says his firm looks at a variety of different factors for each potential investment and then ranks them on a scale from A to E.

The firm also uses a system it calls “360 degrees ESG”. This concept ensures potential investments are com-pliant with Vantage’s ESG goals, but also that it remains a focus throughout each investment’s entire life cycle.

“Understanding what the issues are and integrating ESG thinking into both acquiring and managing an asset are important things to do,” asserts Cable.

He adds that it’s also important to look beyond the obvious; for example, renewable energy shouldn’t be the only focus among sustainable infrastructure projects.

Emma Haight-Cheng, partner and head of infrastructure debt in Europe for Sydney-based AMP Capital, says her firm is currently investing its third infra-structure debt fund and all the funds have followed an ESG-focused strategy.

“From our point of view, a good infrastructure project should be syn-onymous with strong ESG credentials,” Haight-Cheng argues. “Strong ESG per-formance should be synonymous [with] strong business.”

Haight-Cheng points out that AMP Capital recently put a stronger empha-sis on ESG and created a more robust system for checking potential invest-ments beforehand for compliance with guidelines.

She notes that firms should not only consider it because of the long-term implications and returns, but also because LPs are starting to incor-porate questions about ESG into their due diligence.

She adds that when talking to LPs from Europe and Canada, the sustain-ability of an investment comes up fre-quently. Cable and Perkins have found the same, with the latter noting that when it comes to Nordic investors, if you aren’t sustainable, you aren’t getting their support.

ESG investing is less of a focus for US-based LPs, according to multiple general partners. However, that may change.

The Principles for Responsible Invest-ing, which is an organisation focused on sustainable investment practices, has had more than 2,000 firms commit to more responsible investing since its start in 2006. The majority of new sig-natories over the past year have come from the US, including LPs such as the San Francisco Employees’ Retirement System and the Seattle City Employees’ Retirement System.

With ESG being a growing part of the conversation and LPs becoming increasingly interested in it, funds and strategies focused on it are also likely to increase.

“We try to keep moving forward,” Cable says. “We want to be a leader, not a participant, when it comes to thinking around ESG.” n

HOW IMPORTANT IS ESG?

Among the major alternative asset classes, LPs active in infra investment are most likely to give major consideration to ESG when carrying out due diligence

Source: Private Equity International LP Perspectives 2019 survey

Major consideration

Minor consideration

Not a consideration

20%

41%

39%

Infrastructure

Private equity

15%

39%

46%

Private real estate

32%

37%

41%

Private debt

25%27%

48%

Integrating ESG thinking into both acquiring and managing an asset are important things to do” Cable


LPs

Japanese and Korean investors are looking to new strategies for higher returns, finds Eduard Fernández, but the two countries have very different attitudes to ris

Asian investors are ‘hungry for returns’

We’ve heard it time and again at our Hong Kong, Tokyo and Seoul Summits: infra-structure debt is a perfect

match for Korean and Japanese LPs.In recent months, Dai-ichi Life Insur-

ance, one of Japan’s largest insurers, has acted as the anchor investor in two global infrastructure debt strategies, raised by M&G Investments and Tokyo-based Asset Management One Alternative Investments. The country’s AISIN Employee’s Pension Fund has plans to commit up to $50 mil-lion to infrastructure debt.

And some of the biggest asset managers in the sector – such as IFM Investors and AMP Capital – have benefited from grow-ing LP interest from the region.

But what has led Korean and Japanese investors to the asset class in the first place?

A low-interest rate environment has turned it into an attractive proposition for institutions versus fixed-income products, and high liquidity levels in their local mar-kets have pushed LPs to look for opportuni-ties overseas. “Returns are more attractive globally compared to those in domestic markets, and the opportunities abroad are greater,” argues Scott Barker, regional head of APAC at IFM Investors’ debt team.

“Rolling investments [on infrastructure debt] over the course of years have been an attractive opportunity for Korean insur-ance companies to accurately match assets and liabilities,” adds Andrew Jones, global head of infrastructure debt at AMP Capital.

But it would be a mistake to put Japa-nese and Korean LPs in the same basket,

managers warn. “Many of the investors in Japan have looked at investment in infrastructure debt as a possible stepping stone to pursuing an equity strategy in the future,” says Jones.

Korean LPs, on the other hand, have traditionally played a more active project financing role in their local market, and see investment in infrastructure debt as “complementary” to their already-existing equity strategies. “There is more risk appe-tite,” Jones adds.

REGULATORY ADVANTAGESIn Korea, local regulations for insurance companies have also played a role in boost-ing interest for infrastructure debt, due to lower capital charges on “qualified off-shore infrastructure investments”. Accord-

Package: don’t treat Japanese and Korean investors the same

ing to AMP Capital, the legal framework “is increasingly driving demand” for their products there.

The adoption of international account-ing standard IFRS 17 in 2021 may make infrastructure debt more popular than equity for insurers.

Korean investors prefer European assets over US ones, due to the higher hedging costs of the dollar against the won. Securing a US investment can shave up to 170 basis points off returns, Infrastructure Investor was told. But European assets carry their own downsides. “Returns on Euro-pean assets are already low anyway, so it’s very tough for us to seek assets,” a Korean LP source explains.

Institutions in Japan face similar costs, but seem to be more comfortable seeking US strategies that provide a natural hedge.

“Hedging costs have been very high, but senior debt for infrastructure financ-ing is given in floating rates, which means there is a correlation between the base rate and hedging costs,” says Jack Wang, a fund manager at Asset Management One Alter-native Investments. “That allows us to have a natural hedge [against] some of those rising costs.”

At the same time, as senior debt yields fall, more investors are willing to move up the risk curve. “They are starting to look at junior trenches [and] are ready to take a bit more risk,” Niklas Amundsson of placement agent Monument Group says. As the Korean LP puts it: “We are hungry for returns, and we’d rather go for mez-zanine than senior debt right now.” n

FUNDING YOURTOMORROW

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190121_AP_INFRASTRUCTURE_INVESTOR_Ostrum_205x270.indd 1 22/01/2019 11:36

34 DEBT REPORTINFRASTRUCTURE INVESTOR

With only $3.3bn raised by five closed-ended funds, 2018 was the worst fundraising year since 2013. As mandates gain in popularity, are investors falling out of love with debt funds?

Annus horribilis

Top 5 funds in market

Fund name Head office Fund manager Target Size ($bn) Region Focus

Westbourne Infrastructure Debt Opportunities Fund II Australia Westbourne Capital 3.00 Multi-regional

Macquarie Global Infrastructure Debt Fund Australia Macquarie Group 1.15 Multi-regional

Aberdeen Standard Secured Credit Fund United Kingdom Aberdeen Standard Investments 1.02 Multi-regional

Cosmic Blue PF Lotus Japan Asset Management One Alternative Investments 0.92 Multi-regional

BNP Paribas Infrastructure Debt Fund France BNP Paribas Asset Management 0.80 Europe

Top 5 funds closed (2013–18)

Fund name Head office Fund manager Size ($bn) Year close Region focus

Carlyle Energy Mezzanine Opportunities Fund II United States The Carlyle Group 2.82 2016 North America

AMP Capital Infrastructure Debt Fund III Australia AMP Capital 2.50 2017 Multi-regional

Westbourne Capital Infrastructure Debt Fund Australia Westbourne Capital 1.72 2013 Multi-regional

AMP Capital Infrastructure Debt Fund III Co-Investment Australia AMP Capital 1.60 2017 Multi-regional

Macquarie Infrastructure Debt Fund I Australia Macquarie Group 1.26 2015 Europe

Source: Infrastructure Investor

Infrastructure debt fundraising (2013-18)

9

8

7

6

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16

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By region (2013–18)

North America

Multi-Regional

Europe

Asia-Pacific

Middle/East Africa

Latin America

27%

38%

10%

8%

3%

14%

Commitments

FUNDRAISING

the global guide to private debtThe practitioner’s handbook to navigating the asset class

special offer to subscribers:Order your copy today quoting SUBBK15 and receive a 15% discount

www.privateequityinternational.com/global-guide-to-private-debt/

[email protected]

London: +44 (0) 20 7566 5444New York: +1 212 937 0385Hong Kong: + 852 2153 3844

Edited by EPIC Private Equity, this guide is the most comprehensive and detailed publication on the private debt market available today, bringing together the latest views and opinions of 19 of the world’s leading practitioners. it will help fund managers:

• Understand how LPs are constructing private debt allocations within their portfolios

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• Anticipate which strategies are likely to attract the most interest from LPs ...plus much more

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Edited by Dan Roddick, EPIC Private Equity


A look back at some notable quotes on the ups and downs of the global debt market from the past 12 months

Year in review

“Japanese investors are interested in infra-structure debt because it generates very stable income for long periods of time”Jack Wang, fund manager at Asset Manage-ment One Alternative Investments

“We see fundamental upside in infrastruc-ture debt compared with corporate” Adam Larkin, managing director, Mac-quarie Infrastructure Debt Investment Solutions

“We are very keen to become a global player on the infra debt side and Australia is an obvious next step for us in terms of infra debt ” Laurent Jacquemin, head of Asia-Pacific, AXA IM – Real Assets

“What is quite amazing is that pro-ject bonds have been a more common instrument in Europe and North America but less so in Asia” Ray Tay, senior credit analyst, Moody’s

“The advantage the infrastructure debt manager has is the speed” Go Taniguchi, fund manager, infrastruc-ture, Asset Management One Alternative Investments

“The market has been very good at keeping control of leverage creep and the amount of supply has been limited to having an impact on pricing” Phillip Hyman, director, DC Advisory

I don’t see subordinated infrastructure debt replacing infrastructure equity, but I see it as a complementary asset class for those that are investing in the infrastructure equity market” David Ridley, founder & managing director, Westbourne Capital

QUOTABLES

You see some funds trying to be global, which is fine in the equity market, but can you be a successful global fund in infrastructure debt? I don’t know”Guillaume Fleuti, head of infrastructure and corporate debt capital markets, Lloyds Bank

SPECIAL MAGAZINE OFFER:Order your copy today quoting SUBBK15 and receive a 15% discount

INFRASTRUCTUREVALUATIONA guide to the valuation of privately held infrastructure equity and debt

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• Identifies the important dimensions of a very ill-defined and little understood topic - infrastructure investment.

• Details the challenges faced by investors with regards to valuation and risk measurement and proposes a way forward.

• Demonstrates two academically validated asset-pricing models - one for debt, one for private equity - that have been developed with practical and industrial implementation in mind.

• Explains what data should be collected to be able to run these asset-pricing models. …plus much more

www.privateequityinternational.com/infrastructure-valuation/

[email protected]

London: +44 (0) 20 7566 5444New York: +1 212 937 0385Hong Kong: + 852 2153 3844

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