Infrastructure fund GCP in fundraising drive

LONDON (Reuters) - Britain’s only listed infrastructure debt manager is planning a fresh fundraising that could secure the future of many school and hospital projects to which cash-strapped banks can no longer afford to lend.

London-listed GCP Infrastructure Investments GCPI.L hopes to raise as much as 100 million pounds by selling a new class of shares to investors who have spotted a chance to make money by taking on loans to companies responsible for delivering those projects.

Stephen Ellis, partner at Gravis Capital Partners - investment adviser to the fund - said on Wednesday the new issue of C-class shares would finance a “significant” pipeline of projects identified by the fund and was also in response to strong demand from investors, despite nervy equity markets.

“There is clearly a healthy demand from income-hungry investors ... hence the healthy premium price on the fund’s shares,” he said. The stock is trading at 107 pence, against a net asset value of 99.78p.

The new issue will be targeted at retail and institutional investors, who each make up about half of the fund’s current shareholder base.

Infrastructure as an asset class has been growing in popularity as investors seek alternative sources of returns, amid volatile markets and a gloomy economic outlook.

The UK government itself has made much of its plans to persuade institutional investors such as pension funds to invest in British infrastructure projects, as part of its efforts to kick-start growth.

GCP, which listed on the London Stock Exchange in July 2010, has assets of around 164 million pounds and makes its money by lending to the so-called social infrastructure projects that build hospitals and schools.

In the past, such projects have been funded by banks. But the credit crisis and ensuing global recession have restricted funding from banks, allowing new players such as GCP to step in.

“We are in a particular point in the financial cycle that provides a happy hunting ground for us - banks are in full-scale retreat, unenthusiastic about lending against even the most creditworthy projects beyond three to five years, while we ... can effectively match-fund the life of the underlying contracts which is typically around 20 to 30 years,” Ellis said.

Editing by David Holmes