HICL Infrastructure (HICL) has announced that it has disposed of Northwest Parkway and the launch of £50m share buyback programme. Underpinning the validity of its NAV, the net proceeds of the sale of Northwest Parkway to VINCU Highways SAS, of around US$232m, represents a circa 30% premium to HICL’s most recent valuation (30 September 2023). HICL believes that the strong valuation achieved for this asset reflects the fact that its co-shareholders were able to come together to enable 100% of Northwest Parkway to be sold to a strategic buyer and the asset’s strong inflation correlation, particularly over the past two years. Mike Bane, the chair of HICL says “HICL’s latest disposal yet again demonstrates the extent to which HICL’s high quality portfolio continues to be undervalued by public markets. At a significant discount to NAV, HICL’s shares represent a particularly attractive investment and a highly accretive allocation of disposal proceeds.”
Completion of this disposal brings the total value of disposals to over £500m during the past 12 months, reflecting HICL’s active approach to asset recycling. HICL says that £50m of the proceeds from the sale will be used to launch a share buyback programme, with the balance against its revolving credit facility (RCF). The drawn balance on the RCF stands at £650m but is expected to be around £135m at 31 March 2024. HICL also says that the manager, InfraRed, will continue to selectively consider attractive investment opportunities for HICL, where they represent a sufficiently accretive allocation of capital.
With regards to the buyback programme, HICL’s board says that it continues to observe a material disconnect between public market valuations and private market transactions for inflation-correlated core infrastructure, as demonstrated by the c. 30% disposal premium achieved on Northwest Parkway. Given the modest balance remaining on the RCF, and the material discount to net asset value at which the company’s shares currently trade, the board decided to allocate up to £50m of the disposal proceeds towards a share buyback programme. It believes that repurchasing shares will provide shareholders with the benefit of NAV accretion, and will also help to reduce share price volatility. The board intends to commence the programme in due course with the programme to run for a period of up to twelve months.