Singapore’s Clifford Capital Pte Ltd has tied up with China-backed multilateral lender Asian Infrastructure Investment Bank to set up a jointly-owned infrastructure financing platform called Bayfront Infrastructure Management (BIM).
Bayfront’s targeted capital structure of US$1.98 billion comprises $180 million in equity funding and the rest via debt financing. AIIB will contribute to 30% of equity and Clifford will account for the rest.
Singapore state investor Temasek is the biggest shareholder of Clifford Capital.
Asian Development Bank estimates show Asia will need approximately $1.34 trillion annually in infrastructure financing between 2016 and 2020 to sustain economic growth, of which the investment gap is about $455 billion, equivalent to 2.4% of the region’s GDP from 2016 to 2020.
The new company seeks to target that gap by mobilizing institutional capital for project and infrastructure loans.
“Banks are increasingly facing constraints in their ability to bridge the financing gap, due to regulatory constraints,” said Premod Thomas, CEO-Designate of Bayfront Infrastructure Management in an emailed response to Asia Times.
“Institutional non-bank investors are therefore best-placed to step in to fill the financing gap, particularly those seeking longer tenor assets to match their long-term liabilities.”
Thomas said many of these investors are reluctant or not ready to deploy their capital, mainly due to a lack of familiarity with the infrastructure asset class, especially in Asia, and a limited ability to take project construction risk given their preference for stable returns.
BIM, to be operational from the first quarter of next year, will acquire project and infrastructure loans from financial institutions, warehouse and manage them, and then distribute securitized notes based on the pooled assets to institutional investors in the public markets.
The company will also sponsor, structure and manage such distribution issuances, as well as invest in the equity tranches or vertical slices of its securitization issuances to back their confidence in the projects.
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, although such guarantees will not cover the securitized products that BIM will structure and distribute to investors. Singapore has the highest rating from the three global rating agencies.