KBRA Affirms the Rating to BNP Paribas' Participation in a Capital Call Facility to Antin Infrastructure Partners V
5 Feb 2024 | London
KBRA UK (KBRA) affirms the A rating and Stable outlook assigned to BNP Paribas' participation in a capital call facility in the form of a committed and secured rechargeable term loan facility to be used by way of short-term loans or letters of credit (the “Facility”) to the partnerships comprising Antin Infrastructure Partners V (“Antin V” or the “Fund”). The rating was requested by BNP Paribas as a participating lender in the transaction. Neither Antin Infrastructure Partners V nor any of its associates has requested this report or the rating, and this report has not been prepared for or approved by any of them. BNP Paribas has committed €212.5 million to the €2.5 billion Facility.
Key Credit Considerations
Financial Covenants and Structural Features: The primary collateral and source of repayment for the Facility is the uncalled committed capital of the Fund. On an ongoing basis, each partnership is required to maintain uncalled capital commitments ranging from 1.5x to 2.5x, which is then reduced to between 1.3x and 2.3x after 50% of capital commitments have been called, of the aggregate amount of all Fund indebtedness. These Coverage Thresholds vary depending on the specific partnership and have been adjusted to reflect the underlying LP quality in each partnership. Additionally, once 50% of capital commitments have been called, each partnership is required to comply with a Net Asset Value (“NAV”) Ratio test, requiring that the sum of the Undrawn Commitments plus the NAV of the partnership’s existing investments is at least 3.00x the aggregate amount of all Fund indebtedness. A failure to remedy a breach of these covenants within the acceptable cure period will result in an Event of Default under the terms of the Facility Agreement. In addition to the above protective financial covenants, the Lenders also have security over the right of the General Partner to issue capital calls further to a continuing event of default. As of the most recent Compliance Certificate, provided for September 2023, the Facility was in compliance with covenants.
Alignment of Interests: A failure to fulfil a capital call can result in the loss of rights to distributions from the Fund as well as the potential to be restricted from investing in future private capital opportunities. Furthermore, in the event a Limited Partner defaults in respect of its obligation to meet capital contributions, the defaulting Limited Partner is subject to the application of various default provisions.
Limited Partner Diversification: Diversification of the Limited Partner's commitments is determined utilising an adjusted Herfindahl-Hirschman Index (the “HHI”). As of September 2023, the Fund has raised additional commitments since issuance of the rating, however the additional LP commitments have not yet been included within the borrowing base of the Facility. The aggregate borrowing base across all partnerships remains unchanged since issuance, and includes 174 investors with an adjusted HHI of 35.09. The most concentrated borrowing base, Antin Infrastructure Partners V – A SCSp, includes 21 investors with a diversification index of 9.45. This represents a relatively highly concentrated LP base, which is largely offset by the quality of the Limited Partners, which are typically investment grade rated institutional investors. It is expected the diversification of each partnership will improve as additional Limited Partner commitments are approved to be included in the borrowing base of each partnership.
Quality of Limited Partner Commitments: KBRA’s assessment of Limited Partner credit quality considered a combination of third-party public ratings and an independent, internal review of the investors within the borrowing base of the Facility. Approximately 74.8% of the Limited Partner commitments within the borrowing base constitute investors that carry third party public ratings, either directly or through a parent entity, from other Credit Rating Agencies. KBRA evaluated the remaining 25.2% of unrated investors comprising the borrowing base of the Facility. This evaluation resulted in an estimation of approximately 92.1% of total commitments to be of investment grade credit quality.
No Cross Collateralisation Between Partnerships: The partnerships do not guarantee one another’s borrowings at the partnership level. Additionally, for any borrowings at the FinCo level, the partnerships only guarantee the obligations up to their respective pro-rata commitments. As such, KBRA considered the investor base and coverage thresholds of each partnership on a standalone basis in arriving at its final rating.
Manager Experience: Established in 2007, Antin Infrastructure Partners (“Antin” or the “Firm”) is a private equity firm that focuses on infrastructure investments. As of September 2023, the Firm had approximately €30.8 billion of assets under management across its Flagship, Mid Cap and NextGen investment strategies. Antin employs more than 200 professionals across five offices in Paris, London, New York, Singapore, and Luxembourg.
Decline in Limited Partner Credit Quality: A decline in the credit quality of the Fund’s Limited Partners could weaken the underlying collateral base of the transaction and jeopardise the ability of the Fund to repay borrowings as a result of: (i) deterioration in credit quality of the underlying Limited Partners; or (ii) transfer of interest(s) to Limited Partner(s) of lower credit quality characteristics, which may result in negative rating changes.
Increase in Limited Partner Credit Quality: An overall higher credit quality of the Fund’s Limited Partners as a result of: (i) improvement in credit quality of the underlying Limited Partners; or (ii) the transfer of interest(s) to Limited Partner(s) with better credit characteristics, which may result in positive rating changes.
Underperformance of Fund Assets or Investments: Underperformance of the Fund’s underlying assets or investments may jeopardise debt repayment as the deterioration of the Fund may, for example, elicit hesitation of the Fund’s Limited Partners to fund their respective capital calls regardless of their contractual obligations to do so and the security and protections of the lender.
A full report will soon be available on www.kbra.com.
To access rating and relevant documents, click here.