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GCP Infrastructure smashes target with £100m placing

12 January 2018

Strong investor demand for GCP Infrastructure's shares resulted in the board raising its share issue by £40 million.

GCP Infrastructure Investment (GCP) has raised £100 million via a share issue, coming in £40 million above its initial target.

The infrastructure investment company increased the size of its placing from £60 million to £100 million as a result of high demand from investors. The board felt the decision was appropriate, given the fund’s promising pipeline of investment opportunities.

Close to 82 million new shares are due to start trading on the London Stock Exchange's Main Market on 16 January, with a price of 122p each. This represents a 3.9% discount to its closing price on 5 January. The placing will take GCP’s market cap above the £1 billion mark.

The oversubscribed share issue underscores how strong investor demand remains for assets that offer an attractive yield and low volatility. For example, HICL (HICL) and International Public Partnerships (INPP) also enjoyed oversubscribed share issues last year.

Unlike some of its peers in the infrastructure sector, GCP traded on a double-digit premium throughout 2017. Managed by Gravis Capital Management, the fund invests in the senior and subordinated debt issued by private finance initiative (PFI), renewable energy and social housing projects. It currently offers investors a yield of 6.2%.

In contrast, GCP’s peers that invest in public-private partnership (PPP) projects saw their premiums eroded during the second half of last year. This reflected investor concerns that a number had veered away from ‘availability-based’ assets, where regular payments are received from a public sector client if the asset is available for use and meets certain standards, in favour of demand-based assets. For the latter, the income received depends on how much the asset is used.

Shadow chancellor John McDonnell’s comments at the Labour party conference about plans to bring existing PFI contracts ‘back in-house' also proved damaging for the sector.

Over the past five years, GCP’s share price has risen by 57%, largely in line with its net asset value (NAV).

The fund currently trades on a 9% premium to NAV, down from 21% last April.

Investment company news brought to you by Citywire Financial Publishers Limited.

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