Register Log-in Investor Type

News

AT85 Global Mid-Market Infrastructure Income issues ITF

221121 AT85 ITF

AT85 Global Mid-Market Infrastructure Income Plc (AT85) has as issued an intention to float (ITF) this morning, in which it has announced plans for an initial public offering (IPO) for a premium main market listing on the London Stock Exchange, targeting a capital raise of £300m. The IPO includes a placing to institutional investors; an offer for subscription to investors in the UK; and an intermediaries offer. A prospectus in connection with the IPO and Admission is expected to be published in due course. This will include details of a placing programme following the initial issue.

AT85 is targeting a NAV total return of between 8-10% per annum over the medium-term following full investment of its IPO proceeds. It plans to pay quarterly dividends and intends to pay dividends totalling 4.5p per share in respect of the period from Initial Admission to 31 December 2023, rising to 5p in the financial year ending 31 December 2024 and, thereafter, a progressive dividend.

Exposure to the “rapid growth in mid-market core-plus infrastructure assets”

AT85 says that it offers an opportunity to capitalise on the rapid growth in mid-market core-plus infrastructure assets in three key sectors, transport and logistics infrastructure, utility-related infrastructure and digital infrastructure. AT85 has access to an initial portfolio of assets of £98.5m and a total pipeline (including its initial assets) of £539.8m.

Astatine Advisors LLC to manage the portfolio

AT85 has appointed Astatine Advisors LLC as its investment manager. The investment manager is part of the Astatine Investment Partners Group, which was formed in 2005 as Alinda Capital Partners. The manager established one of the first infrastructure funds in the US and AT85 says that it was a pioneer in introducing the infrastructure asset class to the investment industry globally. It changed its name in 2022 to Astatine Investment Partners, to reflect the shift from its origins as a large-cap, core-focused manager to its focus from 2014 onwards on the mid-market, core-plus space.

Astatine has made $13bn of equity investments in infrastructure businesses in North America and Europe since 2005. Astatine’s mid-market strategy from February 2014 to 30 June 2022 delivered a gross IRR of 20.1% (18.1% net), a gross average cash yield of 8%, and a 2x gross multiple on invested capital (MOIC) (1.8x net).

Core versus core-plus infrastructure – Astatine’s view

Astatine views “core-plus” infrastructure to be infrastructure investments that have the potential for both growth and income rather than infrastructure investments that focus primarily on income (which Astatine views to be “core” infrastructure) or primarily on growth (which Astatine views to be “value-add” infrastructure). In selecting investments, Astatine will evaluate an investment’s prospects for delivering both capital appreciation and strong cash yield. Astatine has developed its focus on core-plus infrastructure based on its belief that core-plus infrastructure investments possess the potential to deliver a better risk-adjusted return compared with core infrastructure while delivering an annual cash yield at levels that are superior to those that may be available from value-add infrastructure.

Direct and indirect exposure

AT85 will seek exposure to its key sectors by investing either directly in those sectors or in businesses that are exposed to those sectors. It will seek to gain exposure by investing in opportunities that are (i) part of a sub-sector that is adjacent to traditional sectors, (ii) available through a proprietary bilateral negotiation, and/or (iii) seeking capital where price is only one of the factors being considered. The company and Astatine believe this approach creates opportunities to earn higher risk-adjusted returns relative to those available in conventional core infrastructure, which has become too efficiently priced.

Focusing on yield and downside protection

AT85 says that it and Astatine will seek to deliver a strong and consistent cash yield to investors, cash yield being an important indicator of the health of a well-designed portfolio of investments. They will also seek out downside protection in each investment, through selecting opportunities with strong business fundamentals such as favourable sector trends, robust profit margins, long-term contracts, diverse customer cash flows or structuring the investment using preferred returns and debt with flexible terms that are favourable to equity investors or using other means of providing a greater level of predictability over cash flows.

The initial assets

AT85 has made a commitment of 20% of the net initial proceeds to Alinda Infrastructure Fund IV (AF4), managed by Astatine.

AF4’s primary objective is to seek to generate a combination of long-term capital appreciation and current income through infrastructure investments and related assets, primarily in unlisted core-plus mid-market infrastructure opportunities principally in North America and Europe.

As at the date of the announcement of the ITF, AF4 has investments in ACL Airshop (a global airfreight logistics business) and BTR (a market-leading rental and off-rent vehicle sales provider of specialty vehicles to the environment and waste management industry) and has committed, subject to certain conditions, to acquire an interest in Everfast Fiber Networks (a carve-out of a broadband fibre network business from a publicly-traded communications company).

The two mid-market investments currently held by AF4 have delivered the following returns in the period from acquisition to 30 June 2022:

  • ACL Airshop (acquired in April 2021) generated a gross IRR of 82.0%, average cash yield of 14.1% and gross MOIC of 2.1 times; and
  • BTR (acquired in September 2021) generated a gross IRR of 47.8%, average cash yield of 11.1% and a gross MOIC of 1.3 times.

For the period from April 2021 to 30 June 2022 the mid-market Investments made by AF4 generated an aggregate gross IRR of 67.9% (Net IRR 56.1%), average cash yield of 10.2% and gross MOIC of 1.6 times (Net MOIC 1.5 times).

ACL Airshop

ACL Airshop is a global leasing business of air freight Unit Load Device (ULD) and provider of ancillary equipment and services, headquartered in the USA and with a large presence in the Netherlands. It operates in over 50 airport locations globally across North America, Europe and Asia with a fleet of approximately 73,000 ULDs. ULDs are essential to the movement of air cargo globally; due to the asymmetric nature of global trade flows, ULDs pose a logistical challenge for airlines which ACL Airshop helps to resolve. Through internal sourcing via Astatine and investing alongside management, AF4 was able to make the investment at what Astatine considers to be an attractive price against comparable specialty leasing and pooled equipment transactions.

BTR

BTR operates a diversified fleet of nearly 700 vehicles across a “virtual” partner network that includes around 50 locations throughout North America. The company provides asset-heavy exposure to the US waste management sector, and offers multiple sources of growth including population & GDP, rental model penetration, and expansion into adjacent sectors. It has a diverse base of corporate, municipal and independent customers. Residential and municipal demand is resilient, while some demand such as construction-related use is cyclical, and any COVID-19 related declines in Q2-3 2020 were temporary. The business has demonstrated consistent growth (over 20% revenue CAGR 2017-2021), strong EBITDA margins and cash conversion.

Everfast Fiber Networks

Everfast Fiber Networks is a US single market carve-out of a 100% owned network located in Kansas City from Consolidated Communications. It offers high speed data/internet, network access, voice, and video/ cable TV services. Everfast Fiber Networks has around 13,000 consumer data subscribers, and around 2,000 small/medium enterprise customers across several industries. It owns 5,000km of broadband and passes 138,000 households and 14,000 businesses, while being located in a top 30 metro area of the US with highly attractive demographics.

In addition to the initial portfolio investments in ACL Airshop, BTR and Everfast Fiber Networks that the company would acquire through its conditional commitment to AF4, Astatine and the company are evaluating potential co-investment opportunities in these three assets with an aggregate equity opportunity for the group of US$55.0m (£47.8m).

Astatine has identified a number of further infrastructure investment opportunities in its three target sectors. These are well suited to the company’s investment objective and investment policy, and the investment manager is undertaking due diligence on, or is in discussions for the company to participate in, a number of these opportunities. The total equity opportunity for the company in these pipeline assets is equal to approximately £441.3m, across eight investments, and when added to the initial assets is equal to approximately £539.8m.

Leave a Reply

Your email address will not be published. Required fields are marked *

Please review our cookie, privacy & data protection and terms and conditions policies and, if you accept, please select your place of residence and whether you are a private or professional investor.

You live in…

You are a…