‘Time-consuming’ deals slow fundraising for CICC Capital’s Fund II

The Chinese investment bank's first fund closed the acquisition of a 7.16 percent stake in the Jinan-Qingdao high-speed railway line in October.

CICC Capital, the private equity arm of Chinese investment bank CICC, has postponed the first close of its sophomore infrastructure vehicle as it focuses on the deployment of CICC Infrastructure Fund I, a source with direct knowledge of the situation told Infrastructure Investor.

“CICC Capital hasn’t been very active on the fundraising front, as deals [for its maiden infrastructure fund] are being closed later than expected,” the source said.

The source added that Fund II is aiming to raise 30 billion yuan ($4.2 billion; €3.8 billion) and has a hard-cap of 50 billion yuan. The vehicle has so far raised 6 billion yuan from three domestic investors, the person added.

In April, Infrastructure Investor reported that Fund II was expected to hold a first close during the second half of 2019, and a final close during the second quarter of 2020.

The source said that CICC Infrastructure Fund I – which is backed by the Kuwait Investment Authority and the Agricultural Bank of China – is in the process of closing several “time-consuming” deals involving state-owned enterprises and regional governments in China. Around 60 percent of the 10 billion yuan vehicle has already been deployed, the source added.

In October, CICC Capital announced that a vehicle called CICC Capital High-Speed Railway Investment Fund had invested 2.3 billion yuan to acquire a stake in the Jinan-Qingdao high-speed railway line from a state-owned enterprise in north-eastern China.

The source confirmed that the vehicle, which has acquired a 7.16 percent stake in the asset, is fully owned by CICC Infrastructure Fund I and will not be used to invest in other assets. The source declined to comment on why a new structure was created to pursue the acquisition.

The source also revealed that CICC Capital was initially aiming to invest 9 billion yuan in the railway line, but the regional government declined to sell such a large stake. The source added that a second deal to acquire a new stake in the Jinan-Qingdao line would be finished next month, without providing further details. Fund I is also aiming to invest in another high-speed railway line on the east coast of China, the source said.

Both Fund I and Fund II will target operational assets in the transport, digital infrastructure and public utilities sectors, as Chinese regional governments aim to reduce their debt burdens by monetising infrastructure projects, Infrastructure Investor previously reported.

China Construction Bank and Morgan Stanley jointly founded CICC in 1995 as the country’s first investment bank. The US investment bank exited the firm in 2010. According to CICC’s website, state-owned investment company Central Huijin is currently its major shareholder.

According to its annual report, CICC Capital managed more than 251.6 billion yuan through several offshore and onshore funds as of 30 June 2018.