Overview
The rise of ‘always on’ connectivity, artificial intelligence (AI), and the digitization of our economy have combined to position digital as one of the fastest growing sub-sectors of infrastructure.
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Company
A major operator of communications infrastructure with a platform of assets across Europe.
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Deal origination and sponsor
IFM originated and structured this opportunity via a direct relationship with the sponsor, a specialist digital infrastructure investment firm with extensive investment and operational experience in the sector.
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Loan overview
In 2024, funds advised by IFM, together with a club of lenders, invested in a subordinated loan.
Why this investment?
We felt this investment gave diversified exposure to digital infrastructure across Europe, with a focus on regions where demand for digital services is both strong and growing. In our view, this was an investment that offered attractive relative value given the operating company profiles and financing structure. We also saw the potential for growth and additional debt investment:
An investment backed by a strong portfolio of companies
We were impressed by the investment portfolio, which was comprised of a number of cash-generating companies with conservative leverage and diversification across sub-segments and jurisdictions.
Exposure to essential infrastructure
Each of the portfolio companies provide essential communications infrastructure, including broadcasting and telecoms infrastructure and fiber optic networks, which resonates with our investment philosophy.
Strength of revenue contacts and consumer base
The majority of portfolio revenue is derived from long-term contracts, with some linked to inflation and price adjustments. Where there is exposure to shorter-term contracts, the consumer base is sticky with high barriers to switching.
Well-placed to capitalize on emerging trends
In addition to a strong operating base with supportive market characteristics, the portfolio benefits from segments with growing market tailwinds, including data centers and AI.
Our active approach
What’s been the focus since 2024?
Comprised of digital infrastructure assets across Europe, the portfolio underpinning this opportunity looks set to grow, involving various acquisitions and divestments. Accordingly, the potential for growth is what’s shaped our approach since 2024.
Through our diligence process, we undertook detailed scenario and sensitivity analysis, ensuring we were satisfied with the composition of the portfolio and the robustness of the cashflows – both over time and with potential changes. This ultimately impacted our view on pricing and the appropriate covenants we would need to structure the deal.
The outcome
We extensively negotiated the terms of the financing documents to help ensure there were sufficient protections in place for lenders regarding key clauses. These clauses concerned the composition of the underlying portfolio, and the leverage used, helping us achieve an acceptable credit profile and good relative value for our investors.
We see the investment as providing entry to a platform with strong growth potential. Future opportunities for debt investment look likely, and this is something we continue to monitor.
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Learn moreDisclosures
Case studies are provided for illustrative purposes only and should not be relied on to make an investment decision. This material is provided for informational purposes only. This material does not constitute an offer, invitation, solicitation, or recommendation in relation to the subscription, purchase, or sale of securities in any jurisdiction and neither this material nor anything in it will form the basis of any contract or commitment. Past performance does not guarantee future results. The value of investments and the income derived from investments will fluctuate and can go down as well as up. A loss of principal may occur. This material is confidential and should not be distributed or provided to any other person without the written consent of IFM Investors.
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