ECM to launch European Infrastructure Debt Fund

The ECM European Infrastructure Debt Fund (‘Fund’) will give investors an opportunity to participate in the €120bn [1] per year European infrastructure debt market by investing in senior limited-recourse debt for the construction and operation of infrastructure projects and utilities in continental Europe and the UK. The Fund is structured as a closed-ended English limited partnership deploying debt capital in two parallel vehicles in Euro and Sterling.

Infrastructure debt as an asset class exhibits an attractive risk/return profile with returns on project finance loans generally higher than for corporate financing instruments of similar risk. Historically, default rates have been consistently lower and recovery rates higher than similar rated corporate debt.

In order to secure a strong deal flow, ECM has entered into a strategic partnership with a leading European player allowing unique access to a large number of diverse transactions in Europe and UK on a first right of refusal basis.

The Fund’s strategy is to acquire infrastructure debt assets on a ‘buy-and-hold’ basis creating a highly diversified portfolio of high value/low risk assets.

The countries that the Fund will invest in will be the UK, Germany, France, Belgium, Netherlands, Italy, Spain and other selected countries in the EU. The sectors that will be invested in include renewable energy, social infrastructure, transport, power, oil & gas, telecoms and utilities and the asset class invested in will be limited/non-recourse debt and utility debt. The asset type invested in will be floating rate with flexibility to invest in fixed rate debt (up to 20%).

Nicola Beretta Covacivich, Head of Infrastructure Finance at ECM, notes: “With government funding reduced globally and banks’ appetite for long term lending structurally diminished by Basel III new capital and liquidity rules, funding is evolving as these traditional sources decrease. European infrastructure investments are expected to be approximately €2.5 trillion [2] through to 2020. This is a great time therefore to take advantage of the sizeable supply and demand gap present in this space.”

Kirk Hartman, President and Chief Investment Officer of Wells Capital Management comments: “Infrastructure debt is a long term asset class. The duration of these investments tends to match the long-term liabilities of institutions such as life insurance companies, pension funds and sovereign wealth funds, thus making infrastructure debt attractive to those institutions.”