IFM eyes US transportation growth after latest debt deal

The firm’s recent recapitalisation of General Asphalt is 'a little different' from its usual debt deals, director Matthew Wade says, but it's part of a broader faith in US transportation deals and PPPs.

Last week saw the joint announcement from IFM Investors and SMC Infrastructure Partners of the recapitalisation of Miami-based aviation-focused paving contractor General Asphalt. The deal, which closed before the holidays last year, received additional financing from Turning Rock Partners.

When asked about the deal, Matthew Wade, executive director of IFM’s debt team, stated that “it’s a little different from what we normally do, profile-wise, but is still within IFM’s core mandate of surface transportation”.

Indeed, General Asphalt’s chief executive Rob Lopez said in a statement announcing the transaction that potential buyers and capital partners in the previous year had previously not “understood our business or the infrastructure assets we serve”.

IFM’s North American debt strategy has so far focused on core-plus infrastructure lending – secured lending, utilising investment-grade and sub investment-grade capital.

“We’re a relative-value-focused lender,” Wade said. “There’s a large amount of energy issuance on the infrastructure market and a transaction like this diversifies IFM’s portfolio while still allowing us the ability to be opportunistic in other areas of the capital stack given some of our flexibilities”.

When asked why IFM chose to back General Asphalt in particular, Wade explained: “It’s an established company with a 55-year history, so it provides us access to a pipeline of other infrastructure dealflows and continues to add diversification to our portfolio”. He also specified that the deal would give IFM access points to southern Florida, a region which will be important to IFM’s North American debt strategy moving forward.

Wade further explained that the state government in Florida has created a supportive environment for infrastructure financing. Given that – until last year – the United States had never had a large federal push for PPP programmes, states have taken the reign, and Florida has proven to be a supportive regime in this realm. PPP support was an important component for IFM when crafting its North American debt strategy, Wade added, so states like Florida, California, Texas and Illinois have found their way onto the firm’s radar due to their strong public-private partnership track records.

“We are a firm believer in infrastructure lending as we continue to build out our portfolio,” Wade said, due to the asset class’s low probability of default and high rate of recovery, among other things. Wade concluded: “There are good tailwinds [in infrastructure] not just in renewables but also in roads, bridges and surface transportation. The asset class has performed well and has been resilient these past two years – IFM is continuing to build its pipeline of additional infrastructure transactions in order to take advantage of these tailwinds”.

IFM manages the IFM US Infrastructure Debt Fund, a vehicle launched in 2018 and which has to date raised $933 million, according to Infrastructure Investor data.