German investment bank Berenberg has launched a digital infrastructure debt vehicle as it looks to capitalise on what it sees as a “multi-billion euro” domestic market.
The firm has a target size of €100 million for the Berenberg Digital Infrastructure Debt Fund I and Olaf Lüdemann, head of infrastructure at Berenberg, told Infrastructure Investor it expects to complete the fundraising in about three to four months.
The fund will invest in senior and junior debt with typical ticket sizes of between €10 million and €20 million, with anticipated returns in the “mid-single digit” range. Lüdemann said the vehicle does not have a hard-cap, but added discussions with investors has led it to believe the final closing amount could be higher than €100 million.
The vehicle will invest in senior and junior bonds or promissory notes issued to finance the construction and operational phases of approved and ready-to-build digital infrastructure projects, including 5G masts and data centres, in addition to fibre-optic networks.
The bonds will have either senior or subordinated ranking. “Investors therefore benefit from a superior risk position compared to an equity investment, as well as the advantages of a diversified portfolio,” he said.
The fund will look to finance the construction and operational phases of approved and ready-to-build digital infrastructure projects,
“The main problem is Germany only has a [fibre] penetration of 3-4 percent right now,” Lüdemann explained. “We’re far behind countries like Sweden or Lithuania, which have penetrations of 40-50 percent.”
Berenberg envisages about 70 to 80 percent of the fund being deployed in Germany. Lüdemann also highlighted markets such as Finland, Austria and Switzerland for possible investment.
Berenberg last year launched two renewable energy debt funds, investing a total of €200 million in junior debt across 10 projects and the bank said both funds are now being expanded to meet “the demanding requirements of investors” with regards to diversification and risk-return profiles.