Clifford Capital is an infrastructure credit financing platform focused on origination, distribution, and investment across infrastructure and other real assets globally.
The firm is supported by the Singapore government with a policy mandate to boost exports and overseas investments from Singapore, and has committed to financing projects globally since its inception in 2012.
Clifford Capital recently priced its fifth public infrastructure asset-backed securities (IABS) transaction and its largest to date. Bayfront Infrastructure Capital V (BIC V) is a wholly owned and newly incorporated distribution vehicle of Bayfront Infrastructure Management (Bayfront), a subsidiary of Clifford Capital that also includes the Asian Infrastructure Investment Bank (AIIB) as a shareholder.
BIC V features a portfolio size of approximately $508.3 million spread across 37 individual loans and bonds, 36 projects, 15 countries and 10 industry sub-sectors. BIC V has an initial aggregate principal balance of US$218.4 million of eligible green and social assets, as defined under Bayfront’s Sustainable Finance Framework, which represent 43% of the aggregate principal balance of the portfolio.
FinanceAsia recently caught up with P. Murlidhar (Murli) Maiya, Clifford Capital’s group chief executive officer, to discuss the infrastructure debt financing landscape and its scalability.
Maiya (pictured above): Clifford Capital was established 12 years ago, with the support of the Government of Singapore, to address a financing gap in long-tenor credit for infrastructure companies and projects with a nexus to Singapore. As a group, we benefit from over $5 billion of government guarantees allowing us to raise capital at a very competitive cost, which in turn allows us to extend credit across long tenors.
From a credit perspective, infrastructure financing has always involved a granular analysis of the likely cash flows of the organisation or project that is being funded. One of the cornerstones of our success has been our focus on upholding a high degree of analytical rigour as part of our credit process. This analytical rigour is readily applicable across what is now a much wider spectrum of infrastructure sectors that are relevant today, and this enables us to help many more clients structure innovative debt financing solutions, even for businesses that were not previously thought of as infrastructure.
FA: Could you explain some of the nuances of these verticals and how you see them as a long-term debt financing deal originator?
Maiya: Beyond renewables and digital infrastructure, there is significant interest in the data center space which will accelerate further due to the rise of aritficial intelligence (AI). Unlike conventional real estate projects, data centres often enter long-term contracts with hyper-scalers, like major cloud service providers, and these long trem contracted cash flows provide the basis on which non-recourse debt can be structured.
Social infrastructure such as schools, universities and hospitals are also areas attracting more long-tenor financing given the essential roles they play in society and their incumbency advantages.
In industrials and transportation, we see sectors like steel, cement, and aluminum in transition to cleaner and more energy efficient production methods. A mix of policy support and corporate sustainability goals are also driving financing for interesting new technologies.
Additionally, the transportation sector is undergoing significant changes, particularly in the electric vehicle space. Parts of the electric vehicle (EV) value chain, such as charging infrastructure and batteries lend themselves to infrastructure-like financing solutions. This evolution highlights how both industrials and transportation are key verticals experiencing big shifts around sustainability.
Lastly, for our natural resources vertical, our focus is on new resources like green hydrogen, green ammonia, and key mineral resources like lithium, nickel, etc. to power the sustainable economy of the future.
FA: How do you determine which client opportunities to pursue given your various strategic priorities?
Maiya: We primarily support companies that are based in Singapore or with a strong nexus to the country, by providing them with debt financing when they look to invest regionally or globally. We identify any financing gaps they might encounter in commercial markets. Notwithstanding our government support, we operate on a commercial basis, and always ensure rigorous credit assessment and market-based pricing.
Our credit analysts have expertise across our industry groups. Sustainability is also a key focus for us, and we have been making tangible progress on this front. In 2023, 52% of new primary loans originated were for infrastructure projects that are green and/or sustainable.
FA: Could you share on how sustainability is having an impact on the market space you operate in?
Maiya: The growth trajectory of infrastructure debt financing is strongly influenced by the rise of green and sustainable initiatives. Across client organisations, we've observed varying approaches, but they all converge on a common challenge: the immense funding needed for the green transition to achieve net zero emissions. What stands out is that a third of the global financing requirement is in Asia Pacific (Apac), yet the region is attracting only about 10% of global funding. This gap presents a significant opportunity for companies like us.
Blended finance is another powerful lever to unlock capital for sustainable development as bankability can sometimes be a challenge in Asia. Regional governments, multi-lateral development banks and other sources of concessional capital are making tangible commitments to blended finance.
For example, MAS’s Financing Asia’s Transition Partnership (FAST-P) which is a blended finance initiative that aims to mobilise up to $5 billion to de-risk and finance transition and marginally bankable green projects in Asia.
It is also important to note that Clifford Capital operates in the commercial space, and demonstrating positive commercial outcomes is crucial. By delivering returns to our private sector shareholders, we are not only fulfilling our commercial objectives but also validate our ability to marry public policy goals with private capital initiatives. This demonstration can catalyse other sources of capital over time, showing that it is possible to integrate a public policy purpose into a profitable business model.
FA: How are you different from other players in providing infrastructure project debt financing?
Maiya: We take a distinctive approach compared to most institutional capital providers due to our ability to take on greenfield construction risk and longer tenor financing. Institutional capital often struggles with construction risk, preferring to invest in already operational assets generating cash flow.
Our expertise lies in managing risks during this initial period. We create a bespoke financing package that meets the borrowing client’s needs, while maintaining a discipline around creditworthiness and market-clearing pricing. This combination requires specialised technical skill sets that vary by industry due to differences in contracts and economic business models. We have spent several years investing in teams and processes that allow us to be comfortable operating in the complex environment of infrastructure credit.
FA: How do you plan to scale your debt financing solutions to fill the large funding gap?
Maiya: Clifford Capital has a proven distribution strategy for infrastructure credit. We pioneered the Infrastructure ABS asset class here in Asia and operate a highly successful securitisation business today, under the brand name “Bayfront”. In addition to originating our loans from corporate clients, we acquire loans in both primary and secondary loan markets, largely from the banking sector. We then structure and package the loans into securitised portfolios and distribute various tranches to institutional investors based on their risk appetites. We retain a significant portion of the first loss in these structures.
Our end-to-end origination and distribution model ensures that Clifford Capital can raise significant capital quickly and allows us to fund higher credit volumes by than relying solely on our own capital, making the model highly scalable. Our work to channel institutional debt capital into the infrastructure market through Infrastructure ABS helps bridge the green infrastructure financing gap in the Apac region.
