GIP to raise $2.5bn for two infra debt vehicles – exclusive

The funds offer investors two strategies of varying risk and are targeting gross returns ranging between 9% and 14%.

Global Infrastructure Partners is expecting to close two debt funds this year, raising a combined $2.5 billion, according to a source familiar with the matter.

In the coming months, the New York-based firm will close the second investment vehicle in its GIP Capital Solutions strategy on $1 billion, and it will close a new strategy, the GIP Spectrum Fund on $1.5 billion, the source told Infrastructure Investor. Both funds are a step further into infrastructure debt for a firm that has led the infrastructure industry with a series of multi-billion-dollar equity fundraises.

GIP Capital Solutions Fund II will target riskier mezzanine-level debt transactions and gross returns between 11 and 14 percent, the source said. At the same time, GIP Spectrum Fund is targeting 9 to 11 percent gross returns with a strategy based on joining lending syndicates, writing around $50 million per deal, according to the source. Both funds are expected to close over the summer.

The firm began offering a debt strategy in 2014 with the launch of its first GIP Capital Solutions Fund, which closed on $739 million, falling short of its $2.5 billion target. Unlike its successor, CAPS I was designed to invest across the capital structure, including senior secured debt, unsecured, convertible debt, subordinated debt and preferred equity, sister title Private Debt Investor reported at the time citing pension documents. The fund provided construction and acquisition financing, and liquidity and growth capital, for mainly core infrastructure assets with high barriers to entry in OECD markets.

Jennifer Powers, a former managing director at Mizuho Bank, who joined GIP in 2017, leads the firm’s debt business. Managing partners Reiner Boehning and Steve Cheng manage the GIP Capital Solutions strategy.

Infrastructure debt has been trending upward in recent years as the asset class matures and fund managers seek new products to offer investors. According to Infrastructure Investor data, the industry’s top 15 debt managers raised $84 billion between 1 January 2014 and 31 August 2019.

In December, GIP closed its fourth flagship infrastructure equity fund on $22 billion. Managing 240 LP commitments, GIP plans to invest GIP IV by taking majority positions in energy, transportation, water and waste management assets. The firm is also in the early stages of raising a $5 billion emerging markets-focused vehicle.

The firm declined to comment for this story.