The FINANCIAL — Allianz Global Investors, the diversified global investment manager, had reached the EUR 2 billion infrastructure debt investment milestone with the completion of its eighth transaction, the funding of the A11 motorway development in Belgium, according to Allianz.
AllianzGI, on behalf of its clients, is investing EUR 433m in the senior debt of the A11 project, which involves the construction of a 12km motorway connecting the Port of Zeebrugge with the E40 and E34 roads in western Flanders. The transaction, for which Jan de Nul and DG Infra are lead sponsors, is the first listed construction-phase project bond in Belgium and uses the EIB’s Project Bond Credit Enhancement facility. The final maturity of the bond is 31.5 years, according to Allianz.
Over the past year, AllianzGI has completed eight infrastructure debt transactions across seven European countries. With a focus on investment grade senior debt, AllianzGI is investing in infrastructure asset owning entities with both contracted and regulated revenues, including projects at either the pre-construction or post-construction / operating stages of their life-cycle.
AllianzGI was one of the first global investment managers to establish a dedicated infrastructure senior debt expertise in September 2012. It offers institutional investors, including pension funds, insurers and foundations, the opportunity to make long-term fixed income investments in infrastructure projects. In particular, infrastructure debt offers investors who have long-duration liabilities access to investments with matching long-term stable cash flows and risk-adjusted returns that are currently more attractive than government bonds.
“We are pleased to have reached this important milestone as it provides concrete evidence that there is a real market opportunity for long-term investors to secure an attractive yield via illiquidity premia and credit spreads while offering the reliability of an underlying real asset. It is exciting to be part of the development of a new asset class for investors and a new funding market for borrowers and government authorities. As the market develops and matures we expect to see significantly more institutional investor interest, which will help meet society’s need for substantial infrastructure funding,” said Deborah Zurkow, CIO Infrastructure Debt at AllianzGI.
The creation of infrastructure debt as an asset class offered by investment managers has been spoken about for a number of years but was held back by a lack of specialist expertise within the industry and the dominance of banks in the financing of such long-term projects, according to Allianz.
The acquisition of expertise by large scale players such as AllianzGI, which invests on behalf of Allianz as well as other third party institutional investors, has provided the market with a credible source of long term funding.
Unlike in some other asset classes, making investments in infrastructure debt can take longer to realize. With the institutional offer still in its infancy, the ability of an investment manager to deliver bespoke debt offerings is critical to the credibility of the offering. Investment managers need to establish significant commitments before placing bids for what is often a detailed tender process. Depending on the type of investment, the financing may be deferred or happen in a number of tranches.
In addition to the transactions completed, AllianzGI has a pipeline of investments either at the tender stage or close to completion, according to Allianz.
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