Brookfield closes second debt fund on $2.7bn

The Canadian firm has already made four seed investments from BID II, which it raised in a little over a year.

Brookfield Asset Management has reached final close on its latest infrastructure debt fund on roughly $2.7 billion, substantially exceeding its $1.75 billion target, according to an SEC filing issued on 10 December.

Brookfield Infrastructure Debt Fund II, which focuses on originating junior/mezzanine capital to infrastructure projects primarily in the renewables, utility, transportation, data and energy sectors, is understood to have completed fundraising within 14 months of being launched and made four seed investments to date.

In June, it provided a $300 million loan facility to Vivint Solar, a Utah-based residential solar provider; and another $27 million financing to a wholly-owned non-operating subsidiary of Polaris Infrastructure, a Canadian developer of renewable energy projects in Latin America.

The other two seed investments have not yet been disclosed. Brookfield declined to comment.

Targeted net returns range from 6 to 7 percent, according to documents from the New Mexico State Investment Council, which in April approved a $125 million commitment to the fund.

Other investors include Cathay Life Insurance, which has committed $80 million, while another $610 million came from Shinhan BNP Paribas Asset Management, which is investing on behalf of 12 Korean institutional investors, including major pension funds and insurance companies, through a fund of funds structure, a source told Infrastructure Investor in October.

BID II, which is triple the size of its predecessor – BID I closed on $885 million in December 2017 – is Brookfield’s second fund to reach final close this year. In February, the firm closed Brookfield Infrastructure Fund IV, its fourth flagship infrastructure equity vehicle, on $20 billion, making it the biggest fund it has raised across all asset classes.

It is also one of several infrastructure debt funds to be raised this year as an increasing number of fund managers and investors flock to the asset class, particularly in light of covid and the expected rise in distressed opportunities.

Last week, rival Global Infrastructure Partners, raised a total of $2.8 billion across two funds that comprise its debt platform – GIP Spectrum and GIP CAPS II.

Fund managers are also going up the risk curve launching vehicles that target sub-investment grade debt as well. An example is Macquarie Infrastructure Debt Investment Solutions, which in October raised €730 million via the Macquarie Infrastructure Debt (Sub-Investment Grade) Fund, exceeding the vehicle’s initial €500 million target. It raised an additional €425 million to invest alongside the fund through separately managed accounts or co-investments, bringing the total for this strategy to roughly €1.2 billion.

Brookfield had made clear its intention to focus on infrastructure debt during its Q2 earnings call this year.

“We believe this is an attractive environment for Brookfield Infrastructure to source opportunities for the foreseeable future,” Brookfield’s chief financial officer, Bahir Manios, said in August. “The economic cost of the downturn will be that many industrial companies and all governments will be significantly more indebted. Once the immediate measures to stabilise economies and businesses have been implemented, governments and businesses alike will need to evaluate alternatives to source capital to repay excessively high debt levels.”