Edmond de Rothschild Asset Management (EDRAM) has won the Europe award in the debt fund manager category at IJInvestor Awards 2023, admired by the independent panel of judges for its bold strategy.

One of the judges said: “EDRAM has good scale and a strong story for an independent manager in building a strong investor following reflected in the re-up rate.”

Another of the panel added: “There is a good story to be told here on EDR’s innovative approach to the market – particularly on Ares 2 – and its impressive risk-taking approach.”

This victory at the IJInvestor Awards comes hot on the heels of EDRAM being singled out for honours in the IJGlobal ESG Awards where it picked up the trophy for infrastructure asset manager in the debt category as well as for its Project Ares 2.

This latest award sees EDRAM honoured for outstanding performance over the judging period having in April (2023) announced close on the fifth vintage of its funds at €2.5 billion.

The majority of this – €1.9 billion – was allocated to its senior debt strategy… responding to investor requirements for senior, secured, predominantly investment grade and always Solvency II eligible investments that.

The remaining €600 million was allocated to EDRAM’s Yield Plus strategy which can be both senior or junior (typically in the BB- to BB+ rating bracket) and responding to investors’ additional yield requirements.

As an independent asset manager – having no captive relationship with an anchor investor or internal client – the success of EDRAM’s fundraising is the litmus test for how the investor community views it.

Over the course of 2022, the EDRAM team deployed €1.55 billion across 30 investments, €1.2 billion in senior and €350 million in Yield Plus, with a further €495 million deployed in 2023 to date (at the time of writing the submission) across 18 investments, delivering a diversified portfolio across geographies, sectors, greenfield/brownfield, tenors and rate types.

According to the submission: “A major theme over the course of the year has been energy transition and sustainability. EDRAM has worked with investors to develop their investment criteria and internal thinking in this space, ultimately delivering pathfinder energy transition deals such as Deux Acren and socially sustainable investments such as KP.”

Project KP

Project KP relates to the refinance of a social infrastructure portfolio of pre-schools and care service facilities in Finland owned by Kinland – with Patritzia as Sponsor. Kinland is a social infra company providing high-quality properties for government-backed care services.

The company owns 347 properties and the specific assets financed here provide schooling to children aged 1-6 as well as speciality care needs – child protection, mental health, disabled care.

The portfolio facilitates early childhood development, social and medical care, and education for children attending its pre-schools, supporting the regional social welfare systems it operates in.

EDRAM was the sole lender in this transaction and participated in €110 million split 50:50 between term loan and capex facility for acquisitions.

The rationale for BRIDGE taking 100% of the debt was that the portfolio is an essential service which has proven resilient against economic downturns.

There are strong contracted inflation-linked, long-term cash flows with a weighted average unexpired lease term of around 10 years – twice the tenor of the debt – which are underpinned by Finnish Government risk (AA+).

There are stable underlying macro drivers of growing pre-school enrolment rates and ageing population requiring care.

The financing allowed Kinland to continue to play an essential societal role as a leading provider of social infrastructure across Finland, while also providing capital for future growth.

Project Ares 2

Project Ares 2 is an example of an innovative bilateral energy investment and so impressive that it already won over the judging panel on the ESG awards.

EDRAM structured ARES 1 in 2021, a green bond financing of Francaise de l'Energie (FDE), a French energy producer whose main activity remains the capture of methane emissions (CH4) from abandoned coal mines in France and Belgium to convert or monetise this gas into electricity, gas and heat sales under long-term regulated tariffs or private contracts with local stakeholders such as industrials or municipalities.

Ares 2 dates from April 2022 when EDRAM expanded its financing when FDE acquired 94% of Cryo Pur, a French company specialising in the treatment of biogas and its liquefaction into liquefied biogas (LBG) and Bio CO2 (as by-product from the liquefaction process of biogas).

The ARES 2 financing supported the application of the Cryo Pur technologies on several biogas production sites across Europe, in particular in Norway where fish waste is being treated in biomethanisation plants and then liquefied thanks to the Cryo Pur installations, contributing to the circular economy.

Recovery of CO2 from the Cryo Pur process is also key as it can be used as a carbon capture technology across a long list of industrial carbon intensive activities.

As the submission states: “These financings are directed to innovative and relatively nascent sectors within the energy industry. The challenge of the transaction was to have a balanced approach to provide financing at FDE HoldCo level with a granular covenants package and deep understanding of each technology while allowing enough flexibility to the company to develop and expand.”

Project Malla

Project Malla is the refinance of 5 modern operational wind parks across Norway, Sweden and Finland.

The portfolio is owned by funds managed by Energy Infrastructure Partners (EIP) and Fortum (80% and 20%, respectively) and has an installed capacity of 348MW, generating some 1.1TWh of renewable electricity annually.

The majority of electricity is sold to Fortum and Neste (Finnish corporate) under long term PPAs on an “as produced” basis.

Sponsors sought to achieve long term debt of 23 years against a shorter term PPA structure, noting the cross border portfolio across 3 different countries, 2 equity providers and fluctuating power prices.

EDR played an instrumental role in leading the structuring to ensure debt terms were flexible to adapt to the changing environment, including PPA extension mechanics and mitigating the volatility in power prices in period following the initial outbreak in the war in Ukraine.

According to the submission: “The transaction was complex due to the long merchant tail which was mitigated through forward looking testing and appropriate reserve accounts. The debt structure ensured headroom for changes in power prices while protecting the debt repayment.

“The amortisation was also adapted to the 2 PPAs which were on a pay as produced basis but only for a part of the power output.

“The structure also considered new risks including sizing against ageing assets with up to 30 years plus of asset life taken into consideration with appropriate O&M strategy, technical adviser input and strategic reserves.”

A US PP note structure was used to maximise liquidity.