Aviva in strategic partnership for new debt vehicle

Aviva, the world’s fifth-largest insurer, has joined the likes of AXA and Allianz in backing an infrastructure fund, through its partnership with Hadrian’s Wall Capital. The team plans to launch an infrastructure debt fund that could reach one billion, split equally between pounds and euros.

Hadrian’s Wall Capital, the start-up infrastructure debt advisory firm, has teamed up with Aviva Investors, the asset management arm of the world’s fifth-largest insurer, to launch an infrastructure debt fund.

Aviva: joins Hadrian's
Wall for debt vehicle

The firms said in a statement they would target a final close of ‘one billion’ for the vehicle, split equally between euros and pounds, which will invest in assets across the UK and continental Europe. However, both companies said they would be satisfied with an initial amount of £/€500 million. The new fund is aiming to make a first investment in the second quarter of this year.

Hadrian’s Wall chief executive Marc Bajer told InfrastructureInvestor that he expects to make an announcement in the next “couple of weeks” on when the fund is targeting its first close. He also indicated that a first close might happen with an amount smaller than the £/€500 million indicated in their joint statement. If that were to happen, there will be another close when the fund reaches that amount, he added.

The fund will seek commitments from several types of investors, including pensions and insurers, but a spokesman from Aviva did not wish to comment on whether the insurer would commit any of its own capital.

Previously, Hadrian’s Wall had said the fund will provide subordinated debt positions for capital markets investors with the intent of enhancing the underlying BBB ratings of infrastructure projects. Subordinated debt ranks below senior debt and above equity should a project go bust and is typically more expensive than senior debt because of this.

Hadrian’s Wall will hope that its partnership with Aviva will benefit some of the services it proposes to offer investors in the new fund, including third-party structuring, credit and monitoring and addressing investor concerns about the provision of information and control rights.

Following the demise of the monolines, which traditionally insured bonds issued for infrastructure projects, institutional investors have found it hard to access the infrastructure market. The main problem is that they do not have the in-house expertise to deal with construction risk – the chief culprit in dragging infrastructure projects below investment grade.

By providing structuring, credit and monitoring services, the new vehicle appears to be positioning itself as one of the first private sector solutions to cater to this need. The fact that Hadrian’s Wall's chief executive used to spearhead the European business of one of the only monolines that survived the crisis could position the fund well with institutional investors.