EQT preps Fund V launch amid possible U-turn on bridging fund

EQT could launch its fifth infrastructure fund in the second half of this year in a move that could see the cancellation of a proposed bridging fund for its previous vehicle.

In the Swedish firm’s Q1 2020 report, it said the group was “exploring alternatives to raise additional capital” for its infrastructure programme, as it had outlined in February in its 2019 annual report. However, while in February it said this would be done via a bridging fund, extending Fund IV or through the secondary market, the Q1 report said it was making preparations for EQT Infrastructure V.

“What I can say is that EQT Infrastructure [IV] is 70 percent to 75 percent invested and there are two alternatives, which can either be complementary or you choose one of them, and that’s the bridge and/or starting the fundraising of Infra V,” EQT chief executive Christian Sinding said in an earnings call following the release of the results. “And depending on timing of investments and the timing of the fundraising processes of those two, we’ll decide which way to go. So no decisions have been taken yet, therefore, I can’t comment in more detail.”

Sinding confirmed on the call that preparations are underway for the launch of EQT Infrastructure V, which he said could come in the second half of the year. EQT declined to comment on Fund V or the bridging fund beyond the report and Sinding’s comments on the call.

However, one source told Infrastructure Investor that the launch is likely to take place in the summer, with a potential target size thought to be a little over €10 billion. EQT Infrastructure IV closed in March 2019 on €9 billion, above a target of €7.5 billion.

Sinding maintained in the call that “we’re working on continuing to work on bridging”, although it is understood this is now an unlikely option. Sources have told Infrastructure Investor of a confused reaction by some LPs to the proposed bridging fund in February, with questions raised as to why a fifth fund was not being launched instead.

Sinding said in the earnings call that EQT did not want to launch a fifth fund at the same time as a private equity fund, with the firm having launched EQT IX, a vehicle targeting €14.75 billion, in January.

“We’ve come quite a long way on our EQT IX fundraising, so therefore, we’re ready,” he stated in the call. “We have the resources, we have the capabilities to start preparing for Fund V. So they basically become sequential or as close to sequential as you can get and not completely parallel.”

EQT has made seven investments from Fund IV, with the most recent being its acquisition alongside OMERS of Deutsche Glasfaser from KKR in February. Earlier this month, it halted its proposed buyout of New Zealand retirement village owner and operator Metlifecare due to the negative impact of covid-19.