Infratil raising puts lens on fees

$300m partly cover for payouts, says fund manager

Infrastructure investment company Infratil plans to raise $300 million to speed up the pace of its existing investments and also take advantage of any opportunities in the current downturn.

But the capital raising has drawn criticism from one fund manager who highlighted that Infratil had recently accounted for nearly $200m in performance fees to its manager and dividends to shareholders.

The capital raising is through a fully underwritten $250m institutional placement and a $50m share purchase plan which is not underwritten.

The company, managed by Morrison and Co, said the new capital would give Infratil $514m of funds to draw on as it pays for the rapid expansion of its CDC data centre business, the roll-out of new 5G mobile networks at Vodafone NZ, and energy projects through the likes of Tilt Renewables and Longroad Energy.

Chief executive Marko Bogoievski said the message communicated at the company’s May 29 annual result — that it was comfortable with its capital position — had not changed.

“We do though see an opportunity to bring forward the rate of accretive investment in our existing platforms,” he said.

Infratil’s move comes at a time of revived sharemarkets after a Covid19-driven slump in March. Bogoievski said it was a good time to look at the company’s capital structure. Infratil’s latest annual report shows it paid Morrison and Co $125m in performance fees and paid shareholders $72.5m in dividends. It also paid Morrison $37.5m in management fees.

One fund manager said: “They are raising a few hundred million to reduce debt when they have just paid $72.5m in dividends and $125m in performance fees,” he said.

“Let’s be brutally honest, $200m of the $300m is just to cover that.”

An Infratil spokesman said the first instalment of the performance fee was one third ($42m) with the balance being paid over the next two years, subject to meeting ongoing valuations. “We were also comfortable paying the dividend as it was supported by underlying cashflows — and impending Tilt capital return of $179m — and therefore had no bearing on the equity raise,” he said.

Infratil said in yesterday’s announcement that the company’s gearing would fall from 34.9 per cent to 29.3 per cent as a result of the capital raising. Bogoievski said the company had not identified any additional assets that were in line with its target investment themes.

“Our primary focus is to back our existing platform and our existing management teams.

“Having said that, who knows whether markets will retest those lows [we saw] in the last 12 weeks,” he said.

“We know that if they were to occur we could act opportunistically.”

Infratil said its diversified portfolio of businesses had proved resilient to the impact of Covid-19.

In April, Auckland International Airport raised just over $1 billion in response to the Covid-19-driven shutdown of New Zealand’s borders, but Infratil will not be tipping funds into its 66 per cent-owned Wellington Airport, chief financial officer Philippa Harford said.

Infratil’s placement will comprise of 52.5m in new shares, representing about 8 per cent of existing issued capital. At the placement issue price of $4.76, the new shares represent a discount of 8 per cent to the last NZX close price yesterday.

UBS New Zealand is the sole lead manager of the offer and is fully underwriting the placement, but not the share purchase plan.

A bookbuild was to be held for the placement yesterday, with trading in the shares to resume today.