Gravis lends senior debt at sub debt prices

The fund manager has lent £14.4m of senior debt for a 5MW solar plant and £11.25m of subordinated debt for two PFI projects. Both are long-term loans, but Gravis is actually earning more from the senior debt loan than from the subordinated debt piece.

Gravis Capital Partners (GCP), the London-based fund manager of a circa £150 million (€183 million; $243 million) subordinated debt fund – continues to make good on its promise of lending senior debt at subordinated debt prices with its most recent investment.

In an announcement to the London Stock Exchange today, 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,” GCP said in a statement.

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.

In an interview in the April issue of Infrastructure Investor magazine, GCP partner Rollo Wright said the fund manager was actively taking advantage of growing demand for long-term debt by lending senior debt at subordinated debt prices:

“When we first launched our infrastructure fund we envisaged being primarily a provider of subordinated debt. 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.”

To read the full interview with Wright and find out more about GCP’s plans, please click here

As a result of its two recent investments, GCP has already managed to invest around three-quarters of the £63.7 million it raised in December 2011 through a C-share placement. GCP said it will now proceed to convert the C-shares into ordinary shares.