German asset manager Allianz Global Investors (Allianz GI) has acquired £174.8 million (€211.8 million; $291.4 million) of unwrapped project bonds issued by Scot Roads Partnership, the consortium behind a £415 million motorway upgrade project in Central Scotland.
The transaction, which will be made on behalf of Stanhope Pension Trust, is the first such investment ever made by a UK pension. It will be matched by a loan of an equal amount from the European Investment Bank (EIB), bringing the total borrowed by the project company to £359.6 million. Both debt structures will amortise over approximately 31 years.
Scot Roads Partnership is owned by asset managers Meridiam Infrastructure (30 percent) and Scottish Widows Investment Partnership (30 percent) alongside developers Amey Ventures (20 percent) and Cintra (20 percent).
It consists of the design, construction, operation and maintenance of the M8, M73 and M74 improvement projects. The A8/M8 is the motorway link between Scotland’s two main cities of Glasgow and Edinburgh.
AllianzGI claims that the transaction is the first to feature a listed project bond with a deferred settlement mechanism to alleviate negative carry – which protects investors should yield fall below funding costs – and the first use of an unwrapped construction project bond matched in equal measure by an EIB loan.
Standard & Poor’s attributed an ‘A-’ rating to the debt issue earlier this month, underpinned by what it saw as the relative technological simplicity of the upgrade, the contractors’ track record, the off-takers’ credit worthiness and strong liquidity support during construction and operation.