AIIB sets up securitization platform with Singapore-based Clifford Capital

BIM will acquire project and infrastructure loans from financial institutions, and manage them with the objective of distributing securitized notes to investors

The Asian Infrastructure Investment Bank (AIIB) has set up a securitization platform with Singapore-based Clifford Capital, with the aim of helping infrastructure lenders sell down loans and recycle their capital into new projects.

Bayfront Infrastructure Management Pte (BIM) will be 30% owned by the AIIB and 70% by Clifford Capital.

BIM will acquire a predominantly brownfield project and infrastructure loans from financial institutions, and warehouse and manage them, with the objective of distributing securitized notes to institutional investors in the public markets. BIM will also sponsor, structure and manage such distribution issuances and invest in the equity tranches or vertical slices of its securitization issuances to demonstrate alignment of interest with investors.

A statement from the AIIB said that the platform will benefit existing bank lenders as it relieves their capital constraints by purchasing on balance sheet exposures. It also provides global institutional investors with access to a diversified project and infrastructure loan portfolio through a new investable asset class.

The move comes at a time when governments around the world are trying to bring more institutional debt into infrastructure financing. The big infrastructure financing banks currently provide most of this private debt, but are being held back by higher capital charges for loans on their balance sheets, put in place to make the banking sector safer in the wake of the 2008 financial crisis.

The platform will unlock capital for infrastructure financing by facilitating the recycling of capital and liquidity. It will also give long-term investors such as insurance companies and pension funds an attractive asset class to invest in.  

The establishment of BIM builds on the successful issuance of Asia’s first securitization of project finance and infrastructure loans through Bayfront Infrastructure Capital (BIC), launched in Singapore in 2018. The BIC transaction demonstrated the viability of the Infrastructure Take-Out Facility (TOF) concept. With BIC progressing to a new phase, all future issuances in relation to the TOF will now be undertaken by BIM.

The AIIB said that debt instruments issued by BIM to acquire and warehouse loans from banks are expected to benefit from a guarantee provided by the Government of Singapore (Government Guarantee). However, this Government Guarantee will not cover the securitized products BIM will structure and distribute to investors.

BIM is expected to be capitalized at US$1.98 billion, comprising US$180 million in equity and US$1.8 billion in debt issuance capacity. AIIB will invest US$54 million, representing 30% of BIM’s equity capital, with the remaining US$126 million contributed by a new holding company to be established by Clifford Capital.

The equity commitments from its shareholders and the proposed Government Guarantee are subject to the execution of final documentation. BIM is expected to be operational from the first quarter of 2020.

“This is an important milestone for Clifford Capital as we progress from the successful launch of the Infrastructure Takeout Facility with BIC to the establishment of BIM,” says Clifford Capital Chief Executive Officer Clive Kerner. “We also welcome the participation of AIIB as a strategic partner in this landmark platform that addresses market gaps for infrastructure financing in Asia.”

“AIIB’s investment in BIM is closely aligned with our objectives of developing Asian infrastructure as an asset class and supporting private capital mobilization,” adds AIIB vice president and chief investment officer D.J. Pandian. “Through robust environmental, social and governance criteria, the platform provides institutional investors with a unique opportunity to support sustainable infrastructure projects in Asia.”

Date

3 Dec 2019

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