Mobilising Institutional Capital through IABS
Our distribution platforms are designed to act as issuers of Infrastructure Asset Backed Securities (“IABS”) to institutional investors.
IABS are structured notes backed by diversified portfolios of high quality, senior ranking project and infrastructure loans. IABS offers investors:
- Structural protections, including “first loss” risk retention by the sponsor;
- Regular monitoring by the collateral manager of performance metrics, including overcollateralisation and interest coverage ratios, and cash diversion in the event of a breach; and
- Dedicated portfolio management by the collateral manager with specialised domain knowledge, as well as the ability for the collateral manager to substitute assets in the portfolio on a limited basis during credit events and loan prepayment events.
Through the issuance of IABS, Bayfront has sought to address a number of challenges faced by institutional investors that are interested in accessing opportunities in the infrastructure sector, including:
- Limited investment grade rated opportunities in the emerging markets infrastructure financing space;
- Difficulties in building a diversified portfolio of infrastructure assets without a large capital allocation;
- Lack of resources needed for credit analysis and active portfolio management of infrastructure assets; and
- Limited liquidity in the secondary loan market for project and infrastructure loans.
The IABS asset class enables institutional investors to obtain exposures to diversified portfolios of infrastructure loans in bond format denominations, allowing investors to leverage on Bayfront’s extensive network of bank partnerships to obtain an investment that offers greater liquidity compared to investing in individual loans, along with the benefit of a full range of credit enhancements and portfolio management strategies.
