Star Capital, the UK private equity house, has set up what is thought to be the first active secondary PFI fund with the acquisition of the Secondary Market Infrastructure Fund.
Star, which seeks to invest in strategic assets in Europe, has acquired a portfolio of 23 assets with an underlying gross asset value of £2bn. These comprise interests in the education, local authority and health sectors and have been aggregated over time by a group of companies including Abbey National, Babcock and Brown, and Espirito Santo Investment.
The current portfolio has a net asset value of approximately £120m with a pipeline of acquisitions of a further £100m.
The strategy for the Secondary Market Infrastructure Fund is to acquire, restructure and realise value from a portfolio of infrastructure assets in the UK and Western Europe. In a statement, Star said the fund will acquire investments in social and public infrastructure schemes that offer long-term sustainable cash-flows, substantially inured to the economic cycle.
The fund will be managed by William Doughty, Ian Gethin, Robert Rees and Barry Williams. Doughty has over 13 years experience in project and structured finance. Until recently he headed Abbey's Infrastructure Group where he had responsibility for their infrastructure investments portfolio. Gethin has over eight years' experience in the provision of public sector finance and was until recently responsible for the debt projects franchise within the infrastructure group of Abbey National Treasury Services plc.
Rees headed the Capital Markets team within Abbey's Infrastructure Group and has almost 20 years of experience in the UK equity and bond markets, having worked for Greenwell Montagu Corporate Finance, Barclays Capital and ABN AMRO. Barry Williams joined Babcock & Brown in 1996 from HM Treasury where he was involved in developing the first PFI/PPP projects in the UK. Since then Williams has worked as an adviser and principal in the PFI/PPP and infrastructure sectors. In 2001 he originated the acquisition of investments in £1.5bn of infrastructure projects which led to the establishment of the Secondary Market Infrastructure Fund which he subsequently managed until recently.
“I have always believed in the attractions of the PFI market and its euro equivalents as an investment class that is resilient to economic down turn and produces good risk adjusted returns,” Tony Mallin, Chief Executive of Star said in a statement. “With the benefit of the scale and pan European reach that Star intends to bring to this venture, diversity will further enhance the intrinsic value of this asset class.”