RETURN

1 CASHFLOW ASSET EXAMPLE:

INFRASTRUCTURE DEBT

BNPP AM created its infrastructure debt team to offer investors direct access 
to private infrastructure transactions which can be used to generate stable and predictable long-term cashflows.

Offering attractive spreads, lower default rates and higher recovery rates relative to equivalently rated corporate bonds, infrastructure debt has an appealing risk / return profile that can be used to enhance fixed income and matching portfolios.

BNPP AM focuses on essential physical assets across a diversified universe of projects and companies that have a stimulative effect on the real economy.

Typically the activities financed benefit from regulated revenues with low technological risk offering resilience through the economic cycle.

Further assurance of potential future revenues is reinforced by the strong contractual frameworks, exhaustive security packages and the transference of risk through concession or availability based contracts.

The strategy targets LIBOR +200-250bps across sectors with a weighted average life (WAL of 8-10 years).

Cashflow asset example:

REAL ESTATE DEBT

VIEW CASE STUDY

A
DIVERSIFIED UNIVERSE
OF PROJECTS
AND COMPANIES

PHYSICAL ASSETS INCLUDE:

1
Renewable energy

Solar, on-shore/off-shore wind, biomass, hydro

2
Conventional energy

Storage facilities, gas power plants, pipelines, LNG

3
Utilities

Gas, electricity & heating networks, waste & water treatment

4
Transport

Roads, bridges, tunnels, airports, ports & railways

5
Social infrastructure

Universities, schools, hospitals, prisons, stadiums

6
Telecoms

High speed networks, telecom towers

No assurance can be given that any forecast, target or opinion will materialise.

The management team benefits from an innovative dual track asset sourcing capability:

  • Proprietary extensive sourcing capability established thanks to a working practice with main infrastructure players such as financial and industrial sponsors, financial advisors and banks’ origination and syndication teams.
  • Privileged access to BNP Paribas Group’s extensive origination capabilities. It is an innovative opportunity to benefit from a Tier One bank active in the infrastructure market and have access to a privileged pipeline from a team of experienced investment professionals.

Infrastructure debt is an ideal source for potential CDI assets as the asset class benefits from the following characteristics:

  • Highly secure, covenanted, contractual long-term cashflows (WAL of 8 years)
  • Prepayment protection and modified spens protection
  • Lower default rates and higher recovery rates than equivalently rated investment grade credit
  • Floating rate, fixed rate and index-linked tranches available, particularly as assets can be structured via the BNP Paribas Group

BNP Paribas Group participated in transactions totalling over 3 billion EUR across Europe in 2019 placing it second in the league table of loan arrangers. Source: IJ Global, January 2020.
Source: BNP Paribas AM, PFI Media, IJ Global, January 2020

BNPP AM, June 2020

Features:
  • Unlisted / private market debt to finance specific infrastructure projects (greenfield / brownfield various sectors)
  • Participation in limited number of projects in various Western European countries
  • Coupon is defined as spread over LIBOR therefore participation in yield rise bonds participate in yield rise
  • Low default probability, high recovery rate resulting in 
stable cashflows (Core+)
Methodology:
  • Spread and Weighted Average Life based on fund manager targets. Cashflows based on the characteristics of actual and potential future projects
  • Typical ramp-up period of 4-5 years with largest capital calls in the first two years
  • Expected return based on our long term views on yield curves and funds outperformance target. Expected risk based on propriety factor model and Sharpe ratio assumption (link with return target)
  • Solvency Capital Ratio (SCR) based on unrated qualified infrastructure investments with spread duration of approx. 9 years (favourable treatment)
Metrics:
Spread over Libor 2.4%
Effective duration (interest rate sensitivity) 0.25
Weighted Average Life (WAL) 8.0
Expected return (ER) 3.4%
Expected risk (standard deviation) 3.5%
ER / Stdev 1.0
SCR (solvency capital ratio) 13.8%
ER / SCR 25.0%

No assurance can be given that any forecast, target or opinion will materialise.

BNPP AM, June 2020