U.S. may be next hot spot for infrastructure debt investments

Wed Nov 28, 2012 2:13pm EST
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By Jessica Toonkel

NEW YORK (Reuters) - As asset management firms like BlackRock Inc (BLK.N: Quote) and Allianz Global Investors introduce global infrastructure debt investments in Europe, they are eyeing other markets.

And some say that the U.S. may be a logical next step.

On Monday New York-based BlackRock announced it launched a European infrastructure debt division that will lend to companies in sectors such as transportation and regulated utilities.

In Europe, high-yielding infrastructure loans have been traditionally owned by banks. However, those banks are retreating from this area due to the regulatory environment. At the same time, institutional clients, such as pensions and insurance companies, are searching for higher yields. That is why BlackRock sees an opportunity, said Chris Wrenn, the new co-head of European infrastructure debt at BlackRock.

In general, BlackRock anticipates the yield on infrastructure debt to outperform U.S. Treasuries by around 2.50 to 3 percentage points.

"Investors in this low interest-rate environment are looking for safe, stable assets that can produce good long-term returns," Wrenn said.

That demand is not isolated to Europe. Institutional investors in the U.S. have also expressed interest in these projects through private placements, said Philippe Benaroya, who heads the new group with Wrenn, after working at BlackStone/GSO.

As there are more infrastructure deals resulting from public/private partnerships, the U.S. may become an attractive market for asset managers, said Deborah Zurkow, managing director head of infrastructure debt in the London office of Allianz Global Investors.   Continued...