Ostrum goes east in search of infra debt opportunities

Natixis affiliate is establishing a Hong Kong subsidiary and expects to launch an Asia-Pacific infra debt fund by the year end.

Ostrum Asset Management is establishing a Hong Kong subsidiary as it seeks to expand its infrastructure debt business by exploring opportunities in Australia, South-East Asia and North-East Asia.

The company, an affiliate of French investment bank Natixis, said in a statement that Asia-Pacific had become the world’s largest infrastructure market in terms of investment opportunities and investor demand. It added that the new subsidiary would provide investors with access to this market as well as to co-lending opportunities in partnership with Natixis’s corporate and investment banking division.

“[Infrastructure debt] can’t be managed from Paris,” Lientu Lieu, Ostrum’s head of business strategy, told Infrastructure Investor. “You need the knowledge from that specific market, and also the project analysis is specific to that area.”

She added that the decision “was an opportunistic move, as we found the right people to expand in APAC”.

The subsidiary will be led by Charles Regan in the role of managing director, head of APAC infrastructure real assets private debt. He joins from Windward Capital Asia, an infrastructure investment firm he co-founded, and will initially be heading a team of two.

Alistair Ho is also joining the new entity as managing director, head of co-lending for Asia-Pacific. He was previously managing director, head of structured finance, Asia (excluding Japan) at Mizuho Securities.

Regan told Infrastructure Investor that, through the new subsidiary, Ostrum expects to launch a $500 million fund focused on infrastructure debt in Asia-Pacific by the end of 2019. He said the fund would look to invest in both senior and mezzanine tranches of debt and that it would target opportunities in South-East Asia, North-East Asia and Australia. He added that it aims to invest across the infrastructure sector, including in transportation, renewables, energy and telecom towers.

“We will have a very diversified approach when it comes to both countries and sectors,” he said. Regan said the team expects to originate deals by being in contact directly with developers and equity sponsors from the region.

Asked about the perceived risk of investing in some of the targeted markets, Regan pointed to data from Moody’s, which show that default rates for project finance loans between 1983 and 2014 stood at 6.4 percent in Oceania and 9 percent in South-East Asia. This was compared with 9.3 percent in North America.

“There are 30 years of history and data, and when you look at them, it’s a pretty compelling story in terms of where the real risk is,” he said.

Lieu said that the current price compression being experienced by European infrastructure debt assets had not influenced Ostrum’s decision to move into Asia-Pacific: “The region is growing, and it would be a mistake not to have a presence in it.”