Bayfront Infrastructure Management Pte Limited, a platform designed for institutional investors to access Asia-Pacific infrastructure debt, on September 15 announced the pricing of its third infrastructure asset-backed securities (IABS) transaction amounting to US$402.7 million.
The IABS were issued through Bayfront Infrastructure Capital III Pte Limited (BIC III), a wholly-owned and newly-incorporated distribution vehicle. The latest deal emphasizes Bayfront’s commitment to be a repeat programme-based issuer of IABS. It also demonstrates continued investor demand for such instrument and Bayfront’s ability to help partner banks recycle capital into more infrastructure financing transactions.
Bayfront previously structured and placed two transactions – Bayfront Infrastructure Capital (BIC) in July 2018 and Bayfront Infrastructure Capital II (BIC II) in June 2021.
BIC III features a portfolio size of about US$402.7 million spread across 28 individual loans, 26 projects and eight industry sub-sectors in 13 countries.
The IABS comprise four classes of investment-grade notes rated by Moody’s Investors Service totalling US$374.3 million. The Class A1 notes amounting to US$187.9 million are rated Aaa and issued at par with a spread of 155bp over six-month term secured overnight financing rate (Sofr).
The Class A1 SU amounting to US$110 million is a dedicated sustainability tranche and is backed by a portfolio of high-quality eligible green and social assets. Also rated Aaa by Moody’s, it was likewise issued at par and priced tighter than Class A1 at 150bp over six-month term Sofr, reflecting the robust investor preference for sustainability-related investment products, according to Bayfront. The 5bp “greenium” has been a feature of both BIC II and BIC III transactions where this dedicated sustainability tranche is included.
The Class A1-SU is classified as a Secured Sustainability Standard Bond under the latest International Capital Market Association (ICMA) Green Bond Principles, Social Bond Principles and Sustainability Bond Guidelines.
The other notes are Classes B and C amounting to US$33.4 million and US$43 million, respectively, with spreads of 230bp and 460bp over six-month term Sofr.
The IABS also included unrated preference shares amounting to US$30.2 million, which Bayfront intends to retain in its capacity as sponsor and retention holder to demonstrate alignment of interest with investors. Bayfront’s wholly owned subsidiary, BIM Asset Management, will act as collateral manager.
Through the issuance of IABS, Bayfront offers investors exposure to a diversified portfolio of project and infrastructure loans across multiple geographies and sectors. In doing so, it seeks to address the infrastructure financing gap in Asia-Pacific by mobilizing institutional capital for project and infrastructure debt while helping banks recycle capital into new infrastructure financing transactions.
The issuance saw demand from a variety of investors, including insurance companies, bank treasuries, multilateral financial institutions, private banks, asset managers and others.
Bayfront shareholder Asian Infrastructure Investment Bank (AIIB) participated in the transaction as an anchor investor, with majority of its investment going towards anchoring the Class AI-SU sustainable tranche. Citi is the sole global coordinator, as well as a joint bookrunner and lead manager, along with ING, MUFG, Standard Chartered and SMBC Nikko.
Along with AIIB, Clifford Capital Holdings is another shareholder of Bayfront.
Commenting on the latest deal, Bayfront CEO Premod Thomas says the third IABS issuance reiterates the company’s commitment to create distribution channels to support bankable projects. It also further validates the demand from institutional investors for access to infrastructure projects and the asset class as a sustainable way to address the infrastructure financing gap in this part of the world. “The repeat inclusion of a sustainability tranche is a testament to our focus on creating such investment opportunities for our investor clients,” he adds.
Bayfront intends to be a frequent issuer of further IABS transactions, with an objective of growing its sustainability footprint through the proportion of green and/or social assets within each IABS portfolio, subject to the availability and pace of acquisitions of such loans.
Since establishment, Bayfront has executed memoranda of understanding with 25 partner banks active in project and infrastructure financing. It aims to continue to capitalize on its strong relationship with banks to create liquidity for its issuances on the Singapore Exchange, thus spearheading a genuinely new asset class, anchored in Singapore.