Bayfront Securitization Loan Includes Sustainability Tranche

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$ 401 Million Deal Part of Efforts to Close Asia Pacific Infrastructure Financing Gap

Singapore-based Bayfront Infrastructure Management has completed the securitization of US $ 401 million in infrastructure loans, including a sustainable development tranche, targeting a growing pool of dedicated green institutional portfolios.

Bayfront is a platform designed for institutional investors to access the Asia Pacific infrastructure debt. It aims to fill the infrastructure financing gap in the region by facilitating the mobilization of private institutional capital for the infrastructure financing market.

Bayfront Infrastructure II’s Collateralized Loan (CLO) deal provides investors with a portfolio of 27 project and infrastructure loans in 13 countries in the Asia-Pacific, Middle East and South America. It includes eight industrial subsectors, including conventional energy and water supply (36.4%), renewable energy (25.5%) and integrated LNG (13%).

About US $ 184.8 million, or 46% of the latest deal, are eligible green or social assets under its sustainable financing structure.

Bayfront has developed and maintains an environmental and social framework that will apply to the entire transaction and includes criteria for assessing the environmental and social (E&S) performance of each underlying asset and its key counterparties in the portfolio (including reputational risks associated with E&S). ) as part of the initial check for red flags.

Exclusion list

Loans are screened against the Bayfront E&S Exclusion List (which complies with the bank’s Environmental and Social Exclusion List (ESEL)) and graded. They are then assigned an E&S risk rating, which determines the degree of post-acquisition monitoring and supervision required. The sustainable financing framework that will apply to the sustainability tranche of this operation has been reviewed and a third party opinion (SPO) has been provided to align with the key guidelines of the International Capital Markets Association (ICMA), including the Green Bond Principles (GBP 2018), Social Security Principles Bonds (2020) and the Resilient Bond Guide (2018).

In July 2018, Clifford Capital closed an initial “proof of concept” securitization transaction backed by project loans.

As part of this latest transaction, five classes of investment grade bonds (A1 grade, A1-SU grade, B grade, C grade, and D grade) were offered to institutional investors with a total principal of US $ 361.1 million, which will be listed on the Singapore exchange. The A1-SU class bonds represent a priority tranche of USD 120 million.

The Asian Infrastructure Investment Bank (AIIB) buys a US $ 60 million deal. The company says its core investments will be an important benchmark for ABS’s future infrastructure, which is an important part of the market-building process for creating a new asset class.

AIIB owns 30% of Bayfront, created at the end of 2019 by AIIB and Clifford Capital Holdings, which owns the remaining 70%. Clifford Capital Holdings shareholders include Temasek, Prudential, Asian Development Bank (ADB), Sumitomo Mitsui Banking Corporation (SMBC), Standard Chartered, DBS and Manulife. ADB acquired its stake in September last year.

Bayfront CEO Premod Thomas says the platform aims to expand its network of 22 partner banks and gain wider access to infrastructure loans, especially for sustainable assets.

“Attracting a broader network of institutional investors through our IABS issues and other potential distribution channels is a key part of our strategy to develop a new asset class to help bridge the large infrastructure financing gap in the Asia-Pacific region,” he says.

Gaining momentum

22 partner banks: ABN Amro, ANZ, BNP Paribas, Citi, DBS, DNB, HSBC, ING, JP Morgan, KfW IPEX Bank, Maybank, Mizuho, ​​Mitsubishi UFJ Financial Group (MUFG), NAB, Natixis, NordLB, OCBC bank, Santander, SMBC, Societe Generale, Standard Chartered and UOB.

There is growing optimism that the global CLO market for project loans may finally be picking up steam after years of random deals.

In March, MUFG’s Securitized Products Division acted as the structuring leader in Starwood Property Trust’s first project finance CLO, STWD 2021-SIF1.

The deal was backed by a pool of US $ 500 million in project finance and corporate infrastructure loans. Starwood Property Trust, listed on the New York Stock Exchange, is a diversified financial services company specializing in the real estate and infrastructure sectors. It is a subsidiary of the global private equity firm Starwood Capital Group.

In 2018, Starwood acquired the project lending division of GE Capital Energy Financial Services for $ 2.56 billion. Most of CLO’s assets come from this deal, although Starwood has since lent an additional $ 800 million in debt to renewable energy projects.

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