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GCP mulls further fundraising

The UK-listed debt fund manager says in a trading statement it is considering ‘near term funding options’ amid what it sees as strong investor demand. The firm has notably been earning more from lending senior debt than subordinated debt.

GCP Infrastructure Investments, the London Stock Exchange-listed infrastructure investment manager advised by Gravis Capital Partners, has hinted strongly in an interim management statement that further fundraising is just around the corner.

The statement said: “The company has seen substantial evidence of a growing demand for long term debt finance for infrastructure projects generating public sector-backed cash flows, and the investment advisor is continuing to pursue a variety of attractive investment opportunities.”

It added: “The directors believe this significant investment pipeline provides the company with substantial room for further growth in the near term and as a result they are currently considering various near term funding options.”

In May 2012, GCP said it had invested 75 percent of the £63.7 million (€81.0 million; $99.4 million) it had raised in December 2011 through a C-share placement, and that these C shares had converted into new ordinary shares. It then went on to raise a further £11 million through a tap issue in June.

The management statement said that the firm’s master fund is currently around 97 percent invested and that the net asset value of the fund stood at £153.4 million at the end of July. During the 1 April to 8 August reporting period, GCP made five new investments totalling approximately £45 million with a further £6 million commitment made on 7 August.

The firm has notably been able to lend senior debt at subordinated prices – contrary to the firm’s own initial expectations. “When we first launched our infrastructure fund we envisaged being primarily a provider of subordinated debt,” GCP partner Rollo Wright told us in May. “However, recently we’ve been moving into the senior debt space due to the increasing lack of long-term financing. It’s a market opportunity: we are able to lend on a senior basis and still achieve our target rate of return.”

For example, GCP said it has lent £14.4 million of senior debt to a five-megawatt solar farm backed by the UK government’s feed-in tariff scheme. The 18-year loan will net GCP an annual return of 9.52 percent, “plus an element of inflation protection”. That return compares favourably with the 9.31 percent per year GCP expects to obtain from a 17-year, £11.25 million subordinated loan provided to two UK Private Finance Initiative (PFI) projects – including four schools and one courthouse – which GCP announced on April 27.

The latest statement noted concern about the “slow progress” of the UK government’s vision for infrastructure as outlined in the National Infrastructure Plan 2011. However, it said this was “allayed to some degree” by the July announcement of a £40 billion loan guarantee programme to assist the financing of certain projects.

GCP said it saw a particular opportunity to lend on a senior secured basis to renewable energy projects – such as solar, wind and biomass – due to a lack of available capital from traditional bank lenders.