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HICL Infrastructure announces fundraise

HICL Infrastructure (HICL) has announced that it proposes to raise additional equity capital through the issue of new ordinary shares by way of non-pre-emptive tap issuance. It is proposed that the new ordinary shares will be issued at a price of 169.0p per Share, which represents a discount of 3.1 per cent. to the mid-market closing share price of 174.4p on 7 July 2022 and a premium of 4.9 per cent. to the last reported ex-div NAV of 161.1p (as at 31 March 2022). HICL says that the net proceeds of the issue will restore its revolving credit facility (RCF) capacity and provide additional resources to pursue its near-term pipeline. Separately, HICL has announced a retail offer via the primary bid platform that will run alongside the tap issuance, on effectively the same terms.

The latest time and date for receipt of applications is 4.00 p.m. on Thursday 14 July and it is expected that admission will become effective, and that dealings in the new ordinary shares on the Main Market will commence, on or around Tuesday 19 July 2022. HICL also says that current FY2023 inflation forecasts would support an uplift of 3.0p to 3.6p to the Company’s NAV at 31 March 2022, in line with the NAV sensitivity provided in the FY2022 Annual Results.

The Retail Offer

HICL says that it values its retail investor base and is therefore pleased to provide private and other investors in the United Kingdom the opportunity to participate in the Retail Offer by applying through the PrimaryBid mobile app available on the Apple App Store and Google Play. PrimaryBid does not charge investors any commission for these services.

The Retail Offer, via the PrimaryBid mobile app, will be open to United Kingdom individual and institutional investors following the release of this announcement. The Retail Offer is expected to close at 4pm on 14 July 2022. The Retail Offer may close early if it is oversubscribed. HICL also says that it reserves the right to scale back any order at its discretion and that it and PrimaryBid reserve the right to reject any application for subscription under the Offer without giving any reason for such rejection.

No commission is charged to investors on applications to participate in the Retail Offer made through PrimaryBid, although it is vital to note that once an application for Retail Shares has been made and accepted via PrimaryBid, an application cannot be withdrawn.

Portfolio activity

At 31 March 2022, HICL had utilised £106m of its RCF capacity, which has reduced to c.£90m as a result of the net investment activity since the year end:

  • Completion of the sale of the Company’s 100% interest in the Queen Alexandra Hospital PFI Project;
  • Completion of the acquisition of a 50% equity interest in the B247 Mühlhausen-Bad Langensalza Road PPP, HICL’s first investment in Germany; and
  • Agreement to acquire a 55% shareholding in ADTIM SAS in France from DIF Capital Partners, HICL’s first fibre broadband investment.

HICL says that its investment manager, InfraRed Capital Partners, has developed a strong pipeline including attractive near-term investment opportunities spanning PPP and electricity transmission assets in the HICL’s existing geographies and, as noted above, the issue proceeds will be used to restore RCF capacity and provide additional financial resources in support of the Company’s advanced investment pipeline.

NAV guidance

The Company’s NAV per Share was 163.1p as at 31 March 2022 (ex-div 161.1p). Amongst the assumptions made in reaching that valuation were that short-term (i.e. to March 2023) inflation rates would be as follows:

  • UK RPI and RPIx: 6.0%
  • CPIH : 5.25%
  • Eurozone and Canada CPI: 3.0%
  • USA CPI: 4.0%

Current inflation forecasts for FY2023 are ahead of the assumptions used by the Company in its March 2022 valuation. The scenario provided in HICL’s Annual Report 2022 showed that if inflation were 3% above HICL’s forecast assumptions for the next 12 months, NAV per Share would increase by 3.6p. Based on current inflation forecasts, the March 2022 NAV per Share would have been 3.0p to 3.6p higher. The Company’s September 2022 valuation will reflect updated assumptions for inflation based on latest relevant forecasts where appropriate.

HICL says that, although interest rates have increased since March 2022, the environment for infrastructure investment remains highly competitive and current evidence indicates that HICL’s weighted average discount rate of 6.6% remains appropriate.

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