
Fabrice
Rossary
Chief Investment Officer, SCOR Investment Partners
The infrastructure debt market has shown strong resilience during the pandemic
May 6, 2021
The infrastructure debt market has shown strong resilience during the pandemic. In addition to the nature of the infrastructure sector’s cash flows, which are generally regulated or contractual, the orthodoxy of its financing structure has also been a clear advantage.
Even the challenges faced by the transport sector, which has seen an unprecedent reduction in passenger traffic, have so far been addressed by creditors. Reduced costs in terms of capex (capital expenditures) and opex (operating expenses), and the lengthening of business plans, have enabled structures to stay afloat. Moreover, reserve accounts and comfortable service coverage ratios have been highly effective in their role as shock absorbers.
Going forward, the outlook is very positive.
On the supply side, the push for energy transition and the trend towards digitalization should provide a constant and robust pipeline of primary market transactions. At the same time, European banking capacity is becoming saturated with large loan books, so the banks have no choice but to open those books to other lenders:
On the demand side, the momentum should increase with the combined effect of a still very low yield environment and the implementation of the Sustainable Finance Disclosure Regulation (SFDR).
Obviously, capturing this opportunity requires a seasoned investment team with a strong footprint in the market. However, with banks no longer “short of assets”, direct origination capacity will be less critical. The key factors in terms of extracting excess returns should now be the nimbleness to finance the new sectors knocking at the door of the financing room, and the ability to provide innovative debt structuring solutions.
CIO SCOR Investment Partners
This article is an opinion article and does not constitute investment advice or recommendations. Neither the author nor SCOR Investment Partners assume any liability, direct or indirect, that may result from the use of information contained in this opinion article.
OUR EXPERT
Fabrice
Rossary
Chief Investment Officer, SCOR Investment Partners