Aviva launches infra debt vehicle

The up to 12-year fund has just held a first close on €425m backed by three European insurance companies.

Aviva Investors, the asset management arm of insurer Aviva, has just announced a first close for a brand new infrastructure debt vehicle – the European Secondary Infrastructure Credit Securitisation Vehicle.

The fund, which issues “profit participating notes backed by a portfolio of infrastructure debt” saw its initial €425 million issue subscribed by three European insurance companies, including Aviva France, Aviva Investors said in a statement.

Aviva Investors noted the vehicle will have an average life of between seven and 12 years and an investment period of two-and-a-half years. It will invest a minimum of €10 million per deal and will chiefly seek to acquire bank loans in the secondary market backing operational, core infrastructure assets across Europe, including “public buildings, transport, transmission and distribution, and renewable energy,” the asset manager stated.

The fund will, however, also look at “selective investments in the primary market”.

“Banks have engaged in a huge amount of infrastructure lending over the last 10 years, but are now keen to shrink their balance sheets and shorten the duration of their assets. This offers investors the opportunity to access a new class of secure long-term debt at an attractive return,” commented Laurence Monnier, an infrastructure fund manager at Aviva Investors.

“This new product [offers] exposure to senior loans in the infrastructure asset class at a higher yield than available from investment grade corporate credit, yet arguably with lower risk,” he added.

Until now, the most visible face of Aviva Investors’ debt strategy had been its partnership with Hadrian’s Wall Capital, which resulted in the launch of the Aviva Investors Hadrian Capital Fund 1, targeting more than €1 billion for a mixed euro / sterling fund. The latter intended to facilitate capital markets infrastructure investments by credit enhancing infrastructure bonds.

But after several years on the fundraising trail and no deals closed, the fund decided to wind up and return the circa £150 million (€173 million; $229 million) raised from Aviva, the European Investment Bank and the Development Bank of Japan at first close.

Marc Bajer, chief executive of Hadrian’s Wall Capital, told Infrastructure Investor that “due to the shortage of investment opportunities, the current competitive environment, falling interest rates and tightening credit spreads, I did not feel the fund would be able to deliver its targeted returns to investors. It was a tough decision, but as a result, we have recommended giving the money we raised back to our LPs”.

Aviva Investors has over 10 years of infrastructure experience and is currently involved in infrastructure debt, renewables, and “unleveraged strategies in energy and social infrastructure”.