International Public Partnerships Limited has announced that it has agreed to acquire ten Building Schools for the Future (“BSF”) investments from Balfour Beatty, marking a significant evolution in the Company’s allocation to education infrastructure. The transaction will transform INPP into a majority investor in BSF, the investment delivery vehicle designed to refurbish secondary schools across the UK.
INPP will commit up to GBP72.6 million to the transaction to acquire investment interests in a total of 14 UK schools. The investment opportunity was secured through pre-emption rights that INPP gained as part of its ownership of Building Schools for the Future Investments LLP (“BSFI”). INPP acquired BSFI from the Department of Education and Partnerships UK in August 2011.
Owing to its established position in UK education infrastructure, INPP already holds 10% interests in seven of the Balfour Beatty’s investments in question, and as a result completion of the transaction will increase its stake to 90% in each scheme post-acquisition. INPP will at the same time acquire new interests in a further three BSF schemes previously under Balfour Beatty’s ownership.
The transactions are subject to certain formal rights for the respective local authority partners to also acquire investment interests in these BSF projects which if exercised would reduce the size of investment to be made by INPP. Such rights if exercised must be exercised within a strict timescale and the Company’s current expectation is that it is unlikely that such rights will be taken up.
Like the other BSF projects in which INPP invests, the current investment meets INPP’s investment criteria:
- The projects have long operational lives with a remaining operational term of on average, 21 years;
- The investments conform to the typical UK BSF PFI project funding structure with a well established and standard form risk framework;
- The underlying projects are operational and yielding and will contribute to INPP’s portfolio return immediately upon acquisition.
- The investments’ debt is non-recourse at the project level and matched to the life of the project;
The price for the investment has been completed at a level that offers a projected return that INPP regards as attractive for its investors in current market conditions.
The investment is eligible to be funded through the Company’s debt facility. Following financial close of the acquisition and draw down under the facility the Company will be approximately GBP96.3 million drawn against its GBP300 million revolving corporate debt facility. In addition it has drawn c.GBP140.6 million by way of letters of credit to support its future investment obligations into new projects including its investment commitments to the Tideway project. The Company continues to review its options with respect to capital funding.
Rupert Dorey, Chairman of International Public Partnerships, said: “INPP has cemented its leading position in long-term investment into UK PFI schools. Through the Company’s majority stake in the Buildings Schools for Future portfolio, we have enhanced our education portfolio to cover over 247 schools. This reflects our commitment to sourcing assets where we can create, deliver and safeguard maximum value for investors in our Company.”
About the BSF portfolio
The BSF programme was an initiative launched in 2004 by the previous government with the aim of rebuilding or re-modelling every secondary school in England over a 20 year period. Although the longer term BSF programme has now been replaced, the schools which were the subject of the original programme continue to be actively developed and managed.
INPP originally invested into the BSF programme when it acquired the government’s interest in the BSFI in August 2011. Since this time, the Company has built up considerable experience in managing investments in schools delivered under PFI and PPP programmes, and the acquisition of new interests complement the existing portfolio of over 200 individual schools across the UK. Following this acquisition, school projects now represent c.26% of the Company’s investment fair value (taking into account transactions since 31 December 2015).
INPP buys stakes in ten schools projects