Clifford Capital, an investment firm backed by Singapore’s state investor Temasek, has joined forces with Asian Infrastructure Investment Bank (AIIB) to establish Bayfront Infrastructure Management, a platform to raise institutional capital for infrastructure debt in Asia.
Clifford Capital will be taking a 70 per cent equity stake in Bayfront Investment Management (BIM), while the remaining 30 per cent will be held by AIIB, according to a statement.
BIM, slated for business operation from the first quarter of 2020, is expected to be capitalised at $1.98 billion, comprising $180 million in equity and $1.8 billion in debt issuance capacity.
The establishment of BIM comes a year after Clifford Capital issued Asia’s first securitisation of project finance and infrastructure loans through a special purpose vehicle called Bayfront Infrastructure Capital (BIC).
The BIC transaction demonstrated the viability of the Infrastructure Take-Out Facility concept, designed to unlock additional capital for Asia’s infrastructure financing needs.
As BIC progresses to a new phase, all future issuances in relation to the concept will be undertaken by BIM.
“Leveraging on the success of BIC, we are now committed to developing BIM as a long-term sustainable platform to encourage institutional investor participation in the fast-growing infrastructure funding needs in Asia-Pacific and the Middle East,” said Premod Thomas, CEO-designate of BIM.
BIM’s objective is to unlock capital for infrastructure financing by facilitating the recycling of capital and liquidity by banks, who have traditionally been the largest lenders in this sector.
It will acquire predominantly brownfield project and infrastructure loans from financial institutions, warehouse and manage them, then distribute securitised notes to the public markets.
BIM will also sponsor, structure and manage such distribution issuances, as well as invest in the equity tranches or vertical slices of its securitisation issuances to demonstrate alignment of interest with investors, it said.
That will free up banks’ capital constraints by purchasing on-balance sheet exposures while providing global institutional investors with a diversified and more accessible project and infrastructure loan portfolio.
Debt instruments issued by BIM to acquire and warehouse loans from banks are expected to benefit from a guarantee provided by the Government of Singapore. This Government Guarantee will not cover the securitised products that BIM will structure and distribute to investors.
“Singapore has attracted a diverse mix of industry expertise and networks as part of its ambition to be a full-service Asia infrastructure financing hub. This first-of-its-kind platform demonstrates how infrastructure can be developed as a mainstream, investible asset class for mobilising institutional capital,” said Gillian Tan, executive director and head of financial markets development at the Monetary Authority of Singapore.