Actis adopts InvIT-ready structure for Indian roads portfolio

Asset recycling and reaching a more diverse investor base are important themes for investments in long life assets.

SMBC Asia Pacific

In India, where Infrastructure Investment Trusts (“InvITs”) are poised to be more widely used, the Securities and Exchange Board of India’s (“SEBI”) has set requirements for InvITs to allocate 80% of total assets to completed, profit-generating infrastructure projects and pay out 90% of their net cashflows to unitholders.

This enables debt financing at the holding company level (one level above the InvIT), as many infrastructure project portfolios can support more than InvIT level debt.

One example of this is a portfolio of roads that Actis, a global investor in sustainable infrastructure, had recently acquired. The acquisition of 6 operating road assets totaled 599km, and were strategically located across India, including along the North-South highway corridor, which is a major road-building initiative by the Government of India.

This landmark syndication was the first syndicated toll road in APAC (ex-Australia) which features a certain level of traffic risk. Fully underwritten by SMBC and Barclays, the USD 120m, 4-year senior term loan facility was financed to a holding company owning the assets. Actis will be setting up an InvIT to hold ownership interests in the assets with debt at the assets/Invit level. The transaction was supported by credit funds who came in as participants in the transaction, and the syndication wrapped up shortly after financial closing with oversubscription.

Potential investors were approached on this transaction during a period of heightened market volatility amidst rising interest rates. SMBC and Barclays developed a bespoke syndication strategy to target sophisticated institutional investors with a broader risk appetite. This focused approach allowed for increased investor engagement and helped to ensure the successful syndication. Safeguards structured in the facility such as financial covenants to maintain a debt service coverage ratio and a manageable consolidated leverage, a dividend maximization undertaking, stable cashflows, and protection from FX risks helped in attracting investors to the deal.

See more on how we support our clients with project and export finance.