IFR International - 21.07.2018

Top news

First project loan CLO hits Asia

„ Structured Finance Deal will allow institutional investors to back project finance

BY DANIEL STANTON

Singapore’s CLIFFORD CAPITAL last

week began marketing a

groundbreaking securitisation

OFûPROJECTûlNANCEûLOANSûWHICHû

aims to free up capital for banks

and give institutional investors

access to a new asset class.

The transaction, dubbed a

project and infrastructure loans

take-out facility, comprises a

US$458m securitisation of

PROJECTûlNANCEûLOANSûTHROUGHû

issuing vehicle BAYFRONT

INFRASTRUCTURE CAPITAL.

The transaction’s multiple

classes of US dollar-denominated

senior secured notes are backed

BYûCASHmOWSûFROMûAûPORTFOLIOûOFû

PROJECTûlNANCEûLOANSûFROMû!SIA

0ACIlCûANDûTHEû-IDDLEû%ASTû

Australia, Indonesia and Vietnam

are the biggest exposures,

accounting for a combined 47.7%

of the pool, and there are also

loans to projects in Papua New

Guinea and Mongolia.

The offering aims to free up

bank balance sheets and let

institutional investors take

SOMEûOFûTHEûSTRAINûOFûlNANCINGû

infrastructure. The Asian

$EVELOPMENTû"ANKûESTIMATESû

THATûGOVERNMENTSûlNANCEû

around 70% of infrastructure in

!SIA

0ACIlCûANDûMULTILATERALû

agencies 10%, with bonds

making up only a fraction of

private sector funding.

Clifford Capital wrote in the

prospectus that its aims

included “mobilising a new pool

of institutional capital” and

creating a new asset class for

investors who do not usually

lNANCEûINFRASTRUCTUREûINû!SIA

0ACIlCûBYûUSINGûCREDITû

enhancements to make the

notes more attractive.

HIGH RATINGS

A US$320.6m Class A tranche,

with an expected rating of Aaa

(Moody’s), has a weighted average

life of 3.7 years and an expected

maturity of 7.4 years; a US$72.6m

#LASSû"ûTRANCHEûRATEDû!AûHASûAû

WAL of 8.6 years and expected

maturity of 9.4 years; and a

53Mû#LASSû#ûRATEDû"AAûHASû

a WAL of 9.8 years and expected

maturity of 10.4 years. There is

also a US$45.8m subordinated

tranche that will be retained.

Initial guidance for the Class

A tranche is six-month Libor

plus 140bp–150bp; for the Class

"ûTRANCHEûBPnBPûANDûFORû

the Class C tranche 315bp area.

Clifford Capital, in which

Singapore state investment

company Temasek Holdings has

a 40.5% stake, is collateral

MANAGERûANDû"AYFRONTû

Infrastructure is the issuer.

Proceeds from the issue will

be used to acquire a portfolio of

collateral obligations from

#LIFFORDû#APITALû$"3û(3"#û

-5&'û3-"#ûANDû3TANDARDû

Chartered.

The portfolio will initially

consist of 37 collateral

obligations for 30 projects in

16 countries, with an aggregate

amount of US$458m and a

weighted average spread of

2.5%. The issuer will enter into

participation agreements for

about half of the loans instead

of purchasing them directly.

Around three-quarters of the

projects are operational and the

remainder are in advanced

stages of construction but have

credit support such as sovereign

or sponsor completion

guarantees. Around 38% of the

collateral obligations are

supported by export credit

agencies and multilateral

lNANCIALûINSTITUTIONSûTHROUGHû

credit enhancements.

Given the background of

Clifford Capital and the high

ratings of the tranches, banks

are not marketing the deal only

TOûSTRUCTUREDûlNANCEûSPECIALISTS

“We will talk to the guys who

can buy Clifford Capital in the

bond market,” said one banker

on the deal. “There’s no reason

why they can’t buy something

that pays a higher premium but

has a secure structure.”

Clifford Capital sold US$300m

of 10-year bonds in February

this year at Treasuries plus

49bp, but those bonds are

explicitly guaranteed by the

government of Singapore. They

were bid last Tuesday at

Treasuries plus 75bp, while

Temasek’s 2023 dollar bonds

were quoted at plus 61bp.

A source close to the current

transaction said that banks had

initially explored whether it

was possible to transfer the

government guarantee to the

securitisation, but concluded it

was not. In any case, the top

tranche is rated Triple A, on par

with the Singapore sovereign.

Citigroup and Standard

Chartered are joint global

coordinators. DBS, HSBC and

SMBC Nikko are joint

bookrunners, and MUFG is

co-manager.

Pricing for the Reg S

transaction is expected this

month. „

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