ChapelHill Denham lists first-ever N200bn infrastructure debt fund

ChapelHill Denham has listed the first series of its N200 billion Nigeria Infrastructure Debt Fund (NIDF), reputed as the first-ever listed infrastructure debt fund in Nigeria and sub-Saharan Africa.

The Chapel Hill Denham Nigeria Infrastructure Debt Fund (“NIDF” or “the Fund”) is a close-ended fund, domiciled in Nigeria and denominated in Naira. The Fund is structured to enable investors access infrastructure asset class, while providing benefits of predictable returns available from long-dated infrastructure debt investments.

The first tranche issued is 49.45 million units at N101.20 per unit. The fund will be invested in critical areas of the economy such as power, energy, and logistics.

It would specifically mobilise domestic currency sources for funding infrastructure, which is critical for the Nigerian economy to meaningfully bridge the existing infrastructure deficit.

The NIDF will help direct institutional investments into productive infrastructure assets, which are expected to have a large, positive development impact, through the multiplier effect on investments, economic growth and well-being of the population.

“To be financially viable, these projects require long-dated senior debt, which is increasingly not available from commercial banks. By creating permanent capital, NIDF will be able to support these projects with long-term financing, in the process, generating superior, risk adjusted returns for its investors, almost entirely in the form of running yield,” a statement on the company’s website said.

NIDF will invest in cash yielding loans that have predictable cash flows derived from long-term off-take agreements and/or concessions and/or monopolistic assets, as well as enjoying first priority in cash flow waterfall and senior lien on the project assets.

Typically, the need of debt financing for an infrastructure project is substantially larger than equity. Historically, senior debt financing for infrastructure projects in Nigeria has been provided by commercial banks, financial institutions, export credit agencies and multilateral/bilateral investment agencies, with a large portion, with relatively short tenors.

Considering that the underlying assets have a useful life of as long as 25-30 years, the existing loan tenors are not adequate and therefore cause a mismatch between the time horizon of the loan capital and projects. The availability of debt financing for infrastructure projects has been further constrained with the changes in liquidity conditions faced by banks and the introduction of Basel-III regulatory norms.

On the foregoing scenario, the fund is seen as an opportunity to provide long-term local currency financing for the infrastructure project, which is generally not available for other sources.

The fund is regulated under the Investment & Securities Act 2007 and the rules for Collective Investment Schemes and Infrastructure Funds issued by the Securities & Exchange Commission. The fund manager, ChapelHill Denham Management Limited, has been assigned an “A(IM)” rating by Agusto & Co.