Clifford Capital’s CEO on scaling infrastructure debt financing

Clifford Capital is an infrastructure credit score financing platform centered on origination, distribution, and funding throughout infrastructure and different actual property globally.

The agency is supported by the Singapore authorities with a coverage mandate to spice up exports and abroad investments from Singapore, and has dedicated to financing initiatives globally since its inception in 2012. 

Clifford Capital just lately priced its fifth public infrastructure asset-backed securities (IABS) transaction and its largest so far. Bayfront Infrastructure Capital V (BIC V) is a completely owned and newly included distribution automobile of Bayfront Infrastructure Administration (Bayfront), a subsidiary of Clifford Capital that additionally contains the Asian Infrastructure Funding Financial institution (AIIB) as a shareholder.

BIC V incorporates a portfolio dimension of roughly $508.3 million unfold throughout 37 particular person loans and bonds, 36 initiatives, 15 international locations and 10 trade sub-sectors. BIC V has an preliminary combination principal steadiness of US$218.4 million of eligible inexperienced and social property, as outlined underneath Bayfront’s Sustainable Finance Framework, which signify 43% of the combination principal steadiness of the portfolio.

FinanceAsia just lately caught up with P. Murlidhar (Murli) Maiya, Clifford Capital’s group chief govt officer, to debate the infrastructure debt financing panorama and its scalability.

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FA: Describe your enterprise and the rising developments which might be reshaping the panorama of structured Finance options, significantly in infrastructure investments the place Clifford Capital focuses.

Maiya (imaged above): Clifford Capital was established 12 years in the past, with the help of the Authorities of Singapore, to deal with a financing hole in long-tenor credit score for infrastructure corporations and initiatives with a nexus to Singapore. As a gaggle, we profit from over $5 billion of presidency ensures permitting us to lift capital at a really aggressive price, which in flip permits us to increase credit score throughout lengthy tenors.

Our focus traditionally has primarily been on the power and maritime infrastructure sectors. Nevertheless, the definition of infrastructure has developed considerably over time, particularly with technological progress and the rising emphasis on sustainable and socially equitable growth. As a consequence, we’ve got redefined infrastructure internally to encapsulate all sectors that ship important providers to individuals and enhance the standard of individuals’s lives.

From a credit score perspective, infrastructure financing has all the time concerned a granular evaluation of the probably money flows of the organisation or challenge that’s being funded. One of many cornerstones of our success has been our concentrate on upholding a excessive diploma of analytical rigour as a part of our credit score course of. This analytical rigour is instantly relevant throughout what’s now a a lot wider spectrum of infrastructure sectors which might be related at this time, and this allows us to assist many extra purchasers construction modern debt financing options, even for companies that weren’t beforehand considered infrastructure.

FA: May you clarify a few of the nuances of those verticals and the way you see them as a long-term debt financing deal originator?

Maiya: Past renewables and digital infrastructure, there’s vital curiosity within the knowledge middle house which is able to speed up additional because of the rise of aritficial intelligence (AI). Not like typical actual property initiatives, knowledge centres typically enter long-term contracts with hyper-scalers, like main cloud service suppliers, and these lengthy trem contracted money flows present the idea on which non-recourse debt will be structured.

Social infrastructure reminiscent of faculties, universities and hospitals are additionally areas attracting extra long-tenor financing given the important roles they play in society and their incumbency benefits.
In industrials and transportation, we see sectors like metal, cement, and aluminum in transition to cleaner and extra power environment friendly manufacturing strategies. A mixture of coverage help and company sustainability targets are additionally driving financing for fascinating new applied sciences.

Moreover, the transportation sector is present process vital adjustments, significantly within the electrical automobile house. Components of the electrical automobile (EV) worth chain, reminiscent of charging infrastructure and batteries lend themselves to infrastructure-like financing options. This evolution highlights how each industrials and transportation are key verticals experiencing massive shifts round sustainability.

Lastly, for our pure assets vertical, our focus is on new assets like inexperienced hydrogen, inexperienced ammonia, and key mineral assets like lithium, nickel, and so forth. to energy the sustainable economic system of the long run.

FA: How do you identify which shopper alternatives to pursue given your varied strategic priorities?

Maiya: We primarily help corporations which might be based mostly in Singapore or with a robust nexus to the nation, by offering them with debt financing once they look to take a position regionally or globally. We determine any financing gaps they could encounter in business markets. However our authorities help, we function on a business foundation, and all the time guarantee rigorous credit score evaluation and market-based pricing.

Our credit score analysts have experience throughout our trade teams. Sustainability can also be a key focus for us, and we’ve got been making tangible progress on this entrance. In 2023, 52% of recent major loans originated had been for infrastructure initiatives which might be inexperienced and/or sustainable.

FA: May you share on how sustainability is having an influence available on the market house you use in?

Maiya: The expansion trajectory of infrastructure debt financing is strongly influenced by the rise of inexperienced and sustainable initiatives. Throughout shopper organisations, we have noticed various approaches, however all of them converge on a typical problem: the immense funding wanted for the inexperienced transition to attain internet zero emissions. What stands out is {that a} third of the worldwide financing requirement is in Asia Pacific (Apac), but the area is attracting solely about 10% of worldwide funding. This hole presents a major alternative for corporations like us.

Blended Finance is one other highly effective lever to unlock capital for sustainable growth as bankability can generally be a problem in Asia. Regional governments, multi-lateral growth banks and different sources of concessional capital are making tangible commitments to blended Finance.

For instance, MAS’s Financing Asia’s Transition Partnership (FAST-P) which is a blended Finance initiative that goals to mobilise as much as $5 billion to de-risk and Finance transition and marginally bankable inexperienced initiatives in Asia.

IT can also be essential to notice that Clifford Capital operates within the business house, and demonstrating constructive business outcomes is essential. By delivering returns to our non-public sector shareholders, we’re not solely fulfilling our business goals but additionally validate our means to marry public coverage targets with non-public capital initiatives. This demonstration can catalyse different sources of capital over time, exhibiting that IT is feasible to combine a public coverage function right into a worthwhile enterprise mannequin.

FA: How are you totally different from different gamers in offering infrastructure challenge debt financing?

Maiya: We take a particular method in comparison with most institutional capital suppliers on account of our means to tackle greenfield building danger and longer tenor financing. Institutional capital typically struggles with building danger, preferring to put money into already operational property producing money move.

Our experience lies in managing dangers throughout this preliminary interval. We create a bespoke financing bundle that meets the borrowing shopper’s wants, whereas sustaining a self-discipline round creditworthiness and market-clearing pricing. This mix requires specialised technical ability units that adjust by trade on account of variations in contracts and financial enterprise fashions. We now have spent a number of years investing in groups and processes that enable us to be snug working within the advanced surroundings of infrastructure credit score.

FA: How do you intend to scale your debt financing options to fill the big funding hole?

Maiya: Clifford Capital has a confirmed distribution technique for infrastructure credit score. We pioneered the Infrastructure ABS asset class right here in Asia and function a extremely profitable securitisation enterprise at this time, underneath the model title “Bayfront”. Along with originating our loans from company purchasers, we purchase loans in each major and secondary Loan markets, largely from the banking sector. We then construction and bundle the loans into securitised portfolios and distribute varied tranches to institutional buyers based mostly on their danger appetites. We retain a good portion of the primary loss in these buildings.

Our end-to-end origination and distribution mannequin ensures that Clifford Capital can elevate vital capital rapidly and permits us to fund increased credit score volumes by than relying solely on our personal capital, making the mannequin extremely scalable. Our work to channel institutional debt capital into the infrastructure market by means of Infrastructure ABS helps bridge the inexperienced infrastructure financing hole within the Apac area. 

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