The African Development Bank, with some global development partners, on Tuesday disclosed that the sum of $1 billion had been secured to support investment in infrastructure development in Africa.
The AfDB and its supporting partners in the multi-level securitization finance, include the European Commission, Mariner Investment Group, LLC, Africa50 and Mizuho International Plc.
The continental development finance institution made the disclosure on the funding portfolio tagged ‘Room2Run’ in Ottawa, Canada, describing it as a synthetic securitisation corresponding to a portfolio of seasoned pan-African credit risk.
AfDB stated that the Room2Run was the first-ever portfolio synthetic securitisation between a multi-lateral development bank and private sector investors, which pioneers the use of securitisation and credit risk transfer technology to a new and previously unexplored segment of the financial markets.
According to a news release distributed by the African Press Organisation (APO) Group on the deal, the portfolio, which is structured as a synthetic securitisation by Mizuho International, transfers the multi-level credit risk on a portfolio of approximately 50 loans from among the AfDB’s non-sovereign lending book, including power, transportation, financial sector and manufacturing assets.
The portfolio spans the continent with exposure to borrowers in North Africa, West Africa, Central Africa, East Africa and Southern Africa.
Mariner, the global alternative asset manager and a majority owned subsidiary of ORIX USA, is the lead investor in the transaction through its International Infrastructure Finance Company II Fund.
Africa50, the pan-African infrastructure investment platform, is investing alongside Mariner in the private sector tranche just as additional credit protection is being provided by the European Commission’s European Fund for Sustainable Development in the form of a senior mezzanine guarantee.
Commenting on the importance of the fund, AfDB’s President, Akinwumi Adesina, explained: “Room2Run gives us fresh resources to invest in the projects Africans need most. Africa has the most promise, the greatest natural resources and the world’s youngest population. But we also have the world’s most persistent infrastructure deficits.
“The African Development Bank has the strategy to address these infrastructure finance gaps and Room2Run gives us the capacity to make it happen”, he added.
In connection with Room2Run, AfDB has committed to redeploy the freed-up capital into renewable energy projects in Sub-Saharan Africa, including projects in low income and fragile countries.
Structured as an impact investment, Room2Run is designed to enable the African Development Bank to increase lending in support of its mission to spur sustainable economic development and social progress.
Lead Portfolio Manager and head of the Mariner Infrastructure Investment Management team, Dr. Andrew Hohns, said: “On the Impact scale, Room2Run is off the charts. Room2Run answers the call of the G20 for private sector participants to step in and facilitate development finance, providing a template for attracting significant private sector capital into urgently needed projects in developing economies.”
Also, Head of Infrastructure Investment at Africa50, Raza Hasnani, commented: “Room2Run provides an innovative and commercially viable solution to the African Development Bank’s risk management and lending objectives, while paving the way for commercial investors to support and benefit from the growth of infrastructure on the continent.
“Africa50 is very pleased to participate in this landmark transaction, which is in line with our mandate to drive increased investment in infrastructure in Africa, and to create pathways for long-term institutional capital to flow into this space”, Hasnani added
Room2Run enjoys the support and participation of the European Commission with an investment from the European Fund for Sustainable Development, in the form of a senior mezzanine guarantee.
The European Commissioner for International Cooperation and Development, Neven Mimica, said: “Only a few days after announcing our renewed Alliance with Africa for sustainable investments and jobs, I am very happy to announce that we are, together with the African Development Bank, launching Room2Run.
“This initiative is a perfect example of what we are doing to support investments in African low income and fragile countries through the External Investment Plan. Through Room2Run we provide an additional protection to investments in the field of renewable energy.
“Through our Guarantee, investments under Room2Run will translate into extending supply to many people currently without electricity whilst creating much-needed new jobs”, Mimica stressed.
Structured as an impact investment, Room2Run is designed to enable the bank to increase lending in support of its mission to spur sustainable economic development and social progress.