The Board of HICL Infrastructure (LON:HICL) has announced the successful Private Placement of £150m of loan notes by its corporate subsidiary, Infrastructure Investments LP. Proceeds of the issue will be used to reduce the existing drawings1 on the Group’s Revolving Credit Facility. The Notes will convert the equivalent drawing on the RCF into a longer maturity and fix the all-in interest rate cost at a level below that currently payable on the RCF.
The issue has a weighted average interest rate of 5.75%, after hedging, and is comprised of two tranches: £100m, due in May 2033, and £50m, due in May 2035, with a blended coupon of 5.80%.
The Notes were purchased by Pension Insurance Corporation, Canada Life and Sun Life Capital Management (“Sun Life”), who acquired £50m of the Notes each. Sun Life is part of the same group as InfraRed, the Company’s Investment Manager, and is therefore a related party for the purposes of Chapter 11 of the FCA’s Listing Rules. The purchase of Notes by Sun Life constitutes a ‘smaller related party transaction’ pursuant to LR11.1.10R.
The maturity of the Notes was aligned with the forecast capital returns from HICL Infrastructure’s PPP portfolio.
The Notes are an important lever to assist with diversifying the Company’s available capital sources at a price that is expected to be accretive relative to its investment portfolio return, net of costs. In addition, the Board and Investment Manager continue to manage the Company’s balance sheet conservatively and will look to reduce further the balance on the Company’s RCF through accretive disposals, where appropriate.
Edward Hunt, Head of Core Income Funds at InfraRed said:
“The Private Placement saw strong demand and was more than four times oversubscribed, reflecting the underlying strength of HICL’s investment proposition. The Notes reduce HICL’s interest rate and refinancing risks, provide additional flexibility and diversify HICL’s sources of long-term capital.”
1 As at 19 May 2023 the balance on the RCF was £494m and excludes the proceeds from the notes, the upcoming receipt from the partial sale of Northwest Parkway and the expected investment in the Hornsea II OFTO. After completion of all these transactions, the Company is expected to have drawn c.£360m on its RCF.
