BNP Paribas Asset Management has reached a €300 million first close on its latest European senior infrastructure debt vehicle.
European Infrastructure Debt Fund II is targeting €750 million and has a hard-cap of €1 billion, with initial commitments coming from insurance companies, pension funds and corporates in the UK, France and Belgium, BNP Paribas said, adding that it expected further commitments to come from LPs in Europe and Asia.
As with the fund’s predecessor, the focus of investments will be in renewables and digital infrastructure, although it will also invest in social infrastructure and utilities, with about €250 million already deployed in these four sectors in the Nordics and Western Europe. While the group is not ruling out investments in the transport space, it expects such opportunities harder to come by.
“It is part of the scope, but we are careful with these types of assets. We have two constraints,” Vincent Guillaume, investment director for infrastructure debt at BNP Paribas AM, told Infrastructure Investor. “Firstly, we have strong ESG drivers and part of transport is not really aligned with that. We also see less of a pipeline in transport at the moment because of covid-19 and the pipeline is more scarce. We are looking at rolling stock and rail freight though. We are not active in airports and we are cautious with toll roads and car parks.”
Karen Azoulay, the group’s head of infrastructure debt, acknowledged parts of the digital infrastructure space did not meet investment-grade requirements, but added that there remains significant scope in the sector for the fund.
“Some are investment grade because of the regulatory framework, the contractual framework, the sponsors and the financing structure which can mitigate some risk, so it really depends on a case by case basis,” she said.
The first close of Infra Debt II comes with BNP also raising a European junior infrastructure debt fund. European Junior Infrastructure Debt Fund I is targeting about €500 million and is yet to hold a first close.
Azoulay declined to comment on the funds’ returns, but said Infra Debt II’s target is slightly higher than its predecessor’s, which is currently performing “well above” target. Infra Debt I was launched in 2017, raised €475 million and is now fully deployed.