Barclays Bank has acted to fill a major infrastructure funding void in the UK. It has created what it believes is the first bank-led UK infrastructure debt fund for institutional investors.
The move came shortly after BT had called for a Government-private sector alliance to fund infrastructure to host super-fast broadband in Cambridgeshire.
Barclays feels the new fund provides an innovative private sector solution to broaden the sources of finance backing UK infrastructure.
The initial Barclays Senior Debt Infrastructure Fund I has a target size of £500m. It will invest in social infrastructure, economic infrastructure, renewable energy, electricity transmission and waste-to-energy senior debt executed by Barclays Corporate, which has an established track record of originating and managing these assets.
The fund will have exclusive access to any such projects funded by Barclays Corporate and will be seeded with £200m of assets to give a return from day one. Barclays will retain a 20 per cent interest in each asset alongside the fund. It is only open to institutional investors and not retail investors.
The Government’s National Infrastructure Plan outlines £200 billion of UK infrastructure investment over the next five years. To finance this level of investment the Government will need to attract long term debt not only from banks but also from other institutional investors.
However, institutional investors have few opportunities to access UK infrastructure debt, and a number of banks have either exited the market or reduced their exposure to the infrastructure sector.
David Cooper, head of infrastructure debt at Barclays Corporate said: “It is clear that additional sources of finance have to be accessed to meet the UK’s infrastructure needs, and the Government has called upon the private sector to provide efficient and effective solutions.
“Barclays has responded to this by creating this fund. It provides access to UK infrastructure debt for institutional investors including pension funds, insurers and Sovereign Wealth Funds.”
The fund is currently in the book-building stage. Barclays reports good initial demand from prospective investors. It offers long term contracted cashflows and a diversified portfolio.
Most institutional investors cannot access this attractive asset class as the barriers to entry of originating and managing infrastructure deals are high. For institutions who want instant access to a diversified portfolio at day one, the fund provides an excellent solution to meet their investment appetite without the burden of building their own infrastructure team.
Cooper adds: “The £500m limit for Fund I is a modest aim to begin with. We expect to see institutional investors supporting the modernisation of significant elements of UK public infrastructure whilst gaining long term exposure to this attractive asset class. If demand is as expected, we hope this will be the first of many.”
Photograph shows: David Cooper, head of infrastructure debt at Barclays Corporate