INPP buys and sells BSF projects
Related M&A Transactions
International Public Partnerships Limited (INPP) has announced that it has agreed to a number of transactions within its Building Schools for the Future (BSF) portfolio, consolidating its position within the UK schools sector.
The opportunity to acquire the interest in the project has arisen through pre-emptive rights that INPP gained as part of its 100% stake in Building Schools for the Future Investment (BSFI), which it acquired from the Department of Education and Partnerships UK in August 2011.
INPP will invest £7.2 million and will own 58% of the project, with Kent County Council owning the remaining 42% on completion of the transaction. The project comprises three secondary schools on separate sites located across Kent, all of which align with INPP's key investment criteria:
- The investment debt is non-recourse at the project level and matched to the life of the project;
- The investment has a long operational pipeline, with an average remaining life of 22 years;
- The investment conforms to a typical UK PFI project funding structure with well established and standard form risk framework;
- The project is operational and yielding and will contribute to INPP's portfolio return immediately upon acquisition.
The investment has been completed at a level of projected return that INPP regards as attractive compared to both current market conditions and the evidence of the value obtained by INPP on the disposals referred to below.
Rupert Dorey, Chairman of International Public Partnerships, said:
"INPP is delighted to have acquired this additional interest in the Kent BSF project and to work more closely with Kent County Council. The acquisition demonstrates the value of the pre-emption rights INPP acquired as part of the original BSFI investment and our intention of being a long-term supportive infrastructure investment partner."
In two separate transactions, INPP has agreed to divest its minority interests in the Hull, Leeds, Newcastle, Rochdale and Sandwell BSF (disposals are subject to third party rights to match Dalmore's offer to INPP) projects to the Dalmore Capital Fund, and its minority interest in the Leicester BSF project to Semperian Investments, two secondary market investors in the infrastructure sector who already have significant investments in these school projects. INPP determined that it had no realistic scope to increase its holdings in these particular projects to majority controlling holdings and therefore considered, based on the price offered, a sale would be in the best interests for the company.
The proceeds of sale due to be received following completion of the disposal transactions is approximately £18.75 million which is well in excess of the price paid on acquisition in August 2011; offers a significant premium to the 8-9% internal rate of return (IRR) target of the company; and illustrates the strength of the secondary market for these assets.
INPP expects to re-invest the proceeds from the sale in the current pipeline of new infrastructure opportunities being developed by it and its investment adviser.
Mr Dorey added:
"The divestment of these minority BSF interests highlights the Company's willingness to optimise its portfolio for investors in situations where opportunities to increase the Company's minority position are not available and attractive prices can be achieved."
The BSF programme was an initiative launched in 2004 by the previous government, with the aim of rebuilding or re-modelling every secondary school in England over a 20 year period. Although the longer term BSF programme has now been cancelled by the Government, the schools which were the subject of the programme prior to its cancellation continue to be actively developed and managed.
INPP originally invested into the BSF programme when it acquired the government's interest in the BSFI in August 2011. Since this time, the company has built up considerable experience in managing investments in schools delivered under PFI and PPP programmes, and the acquisition of this new interest compliments the existing portfolio of over 200 individual schools across the UK. In total, school projects now represent c.27% of the net asset value (NAV) of the fund.