Institutions drawn to Salford PFI project

Financing for a UK regeneration deal is being hailed as “the first two-tranche, listed, unwrapped bond for a new PFI project”.

Institutional investors have been attracted to an issue and placing of just over £82.6 million (€98.8 million; $131.5 million) of 29-year wholesale bonds lead managed by Investec Bank.

The proceeds from the issuance will be lent to the operating company which has reached financial close on Salford City Council’s New Pendleton Social Housing Private Finance Initiative (PFI) project in north-west England.

The project, which has reached financial close, involves the design, financing and refurbishment of 1,270 existing dwellings and their maintenance over a 30-year concession period.

The bond transaction, led by FHW Capital, is hailed in a statement as “the first unwrapped two tranche listed bond structure for a new PFI project”.

Senior debt due diligence and document negotiation were carried out by FHW Capital while FHW Dalmore – a joint venture between FHW Capital and Dalmore Capital – will provide managing agent services for the bond investors for the duration of the concession.

Fund manager Dalmore Capital is part of the Pendleton Together consortium, which is leading the Salford PFI project.

“This is an important transaction in attracting institutional lenders to fund new infrastructure projects and in diversifying the sources of investment for the UK’s economic growth,” said Andrew Neill of Investec’s project and infrastructure finance team in the statement.

In June this year, a consortium led by French fund manager Meridiam Infrastructure reached financial close for a UK university project – also using an innovative bond placement.

The £190 million University of Hertfordshire accommodation scheme was closed with a circa £145 million indexed-linked, unwrapped bond with a maturity of 41 years – “the first of its kind to be implemented in Europe,” the Meridiam team claimed in a statement.