Refining the model
Bayfront Infrastructure Management introduced its first sustainability tranche to its latest infrastructure loan securitisation, deepening the nascent asset class and benefiting from a greenium in the process.
BIM, a vehicle 70% owned by Singapore’s Clifford Capital and 30% by the Asian Infrastructure Investment Bank, aims to connect private institutional capital with the infrastructure financing market by acquiring and warehousing loans, then bundling them into securities.
Bayfront Infrastructure Capital, sponsored by Clifford Capital, brought a debut infrastructure asset-backed securities offering in 2018 to help banks take project finance loans off their balance sheets and allow institutional investors to take exposure.
Bayfront Infrastructure Capital II, sponsored by BIM, built on that experience and refined the model with a US$401.2m multi-tranche offering that included an ESG component and additional structuring features.
"Reaching a wider network of institutional investors through our IABS issuances and other potential distribution channels is a key part of our strategy to develop a new asset class to help address the large infrastructure financing gap in Asia-Pacific,” said Premod Thomas, CEO of BIM.
A dedicated US$120m senior sustainability A1-SU tranche was priced at six-month Libor plus 120bp, a 5bp greenium compared with the US$176.9m conventional A1 tranche. Both tranches were rated Aaa by Moody’s with a 3.9-year weighted-average life.
The offering was rounded off by a US$33.3m Class B tranche at Libor plus 185bp, a US$22.1m Class C tranche at plus 235bp, an US$8.8m Class D tranche at plus 340bp, and a US$40.1m preference share tranche that was retained by BIM.
The notes were backed by a portfolio comprising 27 loans to 25 projects spread across 13 countries in Asia-Pacific, the Middle East and Latin America, with industry sectors including power, water and renewable energy.
The sustainable tranche was overcollateralised against a US$184.8m sustainable loan portfolio to ensure it always funds only ESG assets, avoiding the risk that it could end up funding conventional loans if there were higher pre-payments by borrowers in that tranche.
The offering also funded an undrawn commitments account, allowing five loans that were not fully drawn at time of issue to be included in the portfolio. Those loans financed projects still under construction and were scheduled to be fully drawn within six to 12 months of issuance.
A range of institutional investors, from insurers, pension funds and banks to specialised asset managers, participated, alongside AIIB as an anchor investor with a US$60m allocation.
While most of the offering was placed in Asia-Pacific, the sustainable tranche attracted particularly strong demand from European investors, highlighting the diversification benefits to the issuer.
Citigroup, ING and Standard Chartered were joint global coordinators, joint bookrunners and joint lead managers. Citigroup was structuring adviser and ING sustainability structuring adviser.
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