Hadrian’s Wall reaches first close on £160m

Aviva Life & Pensions UK, the EIB and the Development Bank of Japan have backed the debt fund’s first close. The Aviva/Hadrian’s Wall Capital vehicle is targeting £/€1bn to invest in low-risk infrastructure across the UK and Europe.

After two years on the fundraising trail, Aviva Investors, the asset management arm of insurer Aviva, and Hadrian’s Wall Capital (HWC) have announced a first close for their innovative infrastructure debt fund, known as Aviva Investors Hadrian Capital Fund 1.

The partners did not disclose the total raised at first close, but Infrastructure Investor understands the fund has managed to raise some £160 million (€200 million; $251 million) from Aviva Life & Pensions UK, the European Investment Bank (EIB) and the Development Bank of Japan. The EIB had previously made public that it was committing £50 million to the debt vehicle.

The fund will target “low risk infrastructure sectors, including public buildings, transportation and regulated infrastructure, within the UK and continental Europe,” the partners said. In a previous statement, Aviva and HWC said they intend to raise a total of one billion, split between pounds and euros, but indicated they would be satisfied with an initial amount of £/€500 million.

The partners are pioneering a split-funding model, whereupon a company issues investment grade senior debt which is split into two tranches. The fund will invest subordinated debt in the first tranche, credit enhancing the second tranche, which is then sold as a senior infrastructure bond to the capital markets. The idea is to create a credit-enhancing mechanism that will bring the capital markets back into infrastructure investing.

“We believe our approach to financing infrastructure should prove attractive to bond investors and borrowers alike. Bond investors will benefit from receiving long-duration, credit-enhanced bonds, while borrowers gain access to long-term fixed-rate senior debt at attractive rates,” Marc Bajer, chairman and founder of HWC, said in a statement, adding:

“The fund will ultimately support the deployment of senior debt financing across both Sterling and Euros of approximately £/€10 billion at target fund size.”