Mizuho to launch new infra debt fund, targeting over $300m – exclusive

The firm’s asset management company plans to launch the second fund by May, as it mulls going up the risk curve by looking at greenfield and the primary side.

Mizuho Global Alternative Investments plans to launch its second infrastructure debt fund, targeting over 33 billion yen ($303.6 million; €247.5 million) with greenfield assets included in the investment criteria, Jack Wang, an investment officer in the infrastructure team at the firm, told sister publication Private Debt Investor.

The move towards a new fund launch comes as the alternative investment manager has deployed around 90 percent of its investments in project financing opportunities as of end-January.

“We still want to focus on projects with long-term offtake agreements, stable cashflow, and revenue, but we might have to increase the risk profile [of the new fund] by including several greenfield projects and looking at the primary side,” Wang told Private Debt Investor.

Wang noted that as the credit spread has been tightening over the last few years, the margins are very low in the projects that they have been reviewing.

“Given the expected returns from our [existing] investors, I think increasing our risk appetite is worthy,” he noted, adding that the project financing fund series is looking to focus on offshore projects only as credit spreads are too tight in Japan.

The manager closed its debut project financing fund, Cosmic Blue PF Trust Lilly, on 33 billion yen last August, as first reported by Infrastructure Investor. That vehicle targeted brownfield project finance debt, particularly senior-secured loans. The 20-year fund, with a five-year investment period, will convert foreign currency-denominated cashflows from overseas assets into Japanese yen, with currency hedging arranged by commercial banks.

In terms of geographic focus, the first fund has invested across Asia, Europe, North America, and the Middle East. It also has several projects in Southeast Asia and Europe, one project in the Middle East and another one in North America.

The fund mainly sourced deals via Mizuho’s platform and had invested in nine projects out of 30 in its pipeline as of end-January. Over 95 percent of the manager’s investors are Japanese pension funds. The vehicle and its successor are part of a long-term infrastructure debt strategy that may raise as much as 100 billion yen.

The alternative investment manager is wholly owned by Mizuho Financial Group, a Tokyo-headquartered bank holding company, with assets under management of 298.8 billion yen as of March 2017.