Barclays’ fund gets ready to invest in debt

Private equity-type funds investing in the debt rather than equity of infrastructure assets are looking to fill the void left by banks tightening their lending in the face of stricter capital requirements, such as those posed by Basel III.

Basel III rules increasing the amount of capital banks hold in core capital are expected to weigh on the ability of banks to provide infrastructure loans on which cash-strapped governments and developers of power plants, pipelines and renewable energy such as wind farms rely to fund schemes.

In a statement yesterday, the bank said its Barclays Senior Debt Infrastructure Fund I would have a target size of £500m and invest in the senior debt of social, economic and energy infrastructure projects.

Britain’s national plan outlines £200bn of infrastructure investment over the next five years.

David Cooper, head of infrastructure debt at Barclays Corporate, said: “We expect to see institutional investors supporting the modernisation of significant elements of public infrastructure whilst gaining long-term exposure to this attractive asset class.”

Barclays said there was good initial demand for the fund from prospective institutional investors who seek long-term, predictable cash flows, such as pension funds, insurance firms and sovereign wealth funds.

Unlisted infrastructure funds raised £1.7bn globally in the second quarter of 2011, the second quarterly rise in fundraising for assets such as roads, airport and power grids, market research firm Preqin said this month.

Barclays will seed its debt fund with £200m of infrastructure assets to give a return from the first day and said it would tap synergies with its lending arm by giving it exclusive access to any such projects funded by Barclays Corporate.

Barclays added it would retain a 20 per cent interest in each asset alongside the fund. Last year, it completed fundraising for its £645m Barclays Integrated Infrastructure Fund, which invests in the equity of social infrastructure projects.