Plan revealed to entice pension funds

The first fully fledged plan to tempt pension funds back into funding PFI schemes is nearing its launch, the PPP Bulletin has learnt.

Hadrian's Wall, a company run by two former monoline insurer employees, has revealed details of its plans for an infrastructure debt fund that it hopes will lure pension investors back into the market.

No date has been fixed for the fund's launch, but its backers say it is "well-advanced".

The infrastructure fund – which could be backed by traditional investors in infrastructure equity funds – will provide a tranche of subordinate debt within a package of senior debt from pension funds and other institutional investors.

Because the infrastructure fund money will be so-called 'first loss', meaning it is repaid after senior debt in the event of default, any pension fund investors will effectively have a stronger guarantee for their investment. That raises the credit rating of PFI investments to an acceptable level.

Hadrian's Wall has been set up by Marc Bajer and Ralph Eley, two former senior employees of the monoline insurer Assured. Bajer was Assured's UK chief executive, while Eley was managing director of infrastructure.

In a statement given to the PPP Bulletin, they said: "Hadrian's Wall Capital is well-advanced in the development of an infrastructure debt fund, with the primary objective of facilitating senior debt funding for infrastructure projects in the capital and other markets.

"The fund will provide subordinated debt positions within senior-ranking infrastructure bonds, in order to produce an acceptable risk profile for capital market investors. The approach will enhance the underlying BBB-ratings of infrastructure projects."

The plan relies on the company's ability to offer detailed monitoring and due diligence, drawing on Bajer and Eley's monoline experience.

They will also provide pension fund investors with more information than they have traditionally received. Many pension funds remain angry over the collapse of the monoline insurers and confused about the nature of the PFI investments they hold.

Bajer and Eley would not give details of how large they expect the fund to be, saying only that they expect it to act on a "significant" number of projects.  It will not, however, be limited to PFI and PPP schemes, and will invest in infrastructure projects across Europe.

No details have been given on possible investors or the balance between the first-loss debt and the pension fund investments.

A more detailed announcement is expected by the end of the month.

Getting pension funds back into the market is widely regarded as a vital move in improving PFI funding. James Stewart, the head of Partnerships UK, said recently that it was the "Holy Grail" for the industry because of the potential it offered to widen the pool of funders and to drive down the price of finance.