Bayfront Infrastructure Management prices US$401m infrastructure asset-backed securities

INFRASTRUCTURE financing platform Bayfront Infrastructure Management has priced US$401 million in infrastructure asset-backed securities, almost half of which are sustainable green or social assets.

The transaction gives investors exposure to a portfolio of 27 project and infrastructure loans across 13 countries in the Asia-Pacific, the Middle East and South America; and eight industry sub-sectors, including conventional power and water (36.4 per cent), renewable energy (25.5 per cent), and integrated liquefied natural gas (13 per cent).

About US$184.8 million or 46 per cent of the portfolio are considered eligible sustainable green or social assets according to its sustainable finance framework.

Bayfront is a 70-30 joint venture between Temasek-backed Clifford Capital Holdings and the Asian Infrastructure Investment Bank (AIIB). Its platform seeks to distribute infrastructure debt in Asia and the Middle East by helping project finance banks recycle their balance sheets while giving institutional investors a diversified portfolio of assets to buy into.

In the current transaction, five classes of investment-grade rated notes (Class A1, Class A1-SU, Class B, Class C and Class D) in aggregate principal amount of US$361.1 million were offered to institutional investors and will be listed on the Singapore Exchange, Bayfront announced on Friday.

Specifically, the Class A1-SU notes is a dedicated US$120 million senior sustainability tranche, representing 33.2 per cent of the aggregate principal amount of the notes. Proceeds from these sustainability notes will be fully allocated to a portfolio of eligible green and social assets that meets the eligibility criteria stated in Bayfront's sustainable finance framework.

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Here, green assets include solar energy, wind energy, and run-of-river hydropower. Examples of social assets include desalination facilities for residents in the Middle East, infrastructure for electricity access in Cambodia, as well as roadway upgrades in an unnamed country in South-east Asia.

The target portfolio has a weighted average rating factor of 748, comparable to Bayfront's first infrastructure project finance securitisation in the Baa3/Ba1 region. This new portfolio has a weighted average spread of 2.3 per cent, and a weighted average life of 5.9 years.

The AIIB participated in the transaction as an anchor investor and was allocated 17 per cent of the portfolio. Other investors include banks (48 per cent), insurance companies and pension funds (21 per cent), as well as asset managers (14 per cent). Issuance was done through Bayfront Infrastructure Capital II, a wholly owned and newly incorporated distribution vehicle.

Since its inception in November 2019, Bayfront has inked partnerships with 22 banks active in the Asia-Pacific region relating to collaborating on the takeout mechanism for project and infrastructure loans.

It plans to grow the network to widen its access to infrastructure loans, especially in relation to sustainable assets, said its chief executive officer Premod Thomas.

Bayfront is also looking at more regular issuances, in around 12 to 15-month intervals, Mr Thomas said.

"As we bring more supply to markets, we hope to create (infrastructure asset backed securities) as a regular asset class, potentially with the ability for investors to actually trade the securities on the SGX (Singapore Exchange)," he said.