InfraRed Capital Partners to manage Digital 9 Infrastructure

Digital 9 Infrastructure (DGI9) has announced that it has entered into an agreement to appoint InfraRed Capital Partners Limited as the company’s investment manager and AIFM in charge of implementing DGI9’s previously announced managed wind-down. The appointment is subject to regulatory approvals and third-party consents although the board anticipates the appointment will become effective in the fourth quarter of 2024. The existing manager, Triple Point Investment Management LLP, will continue to manage DGI9’s portfolio until the management transitions to InfraRed.

Investment management review concluded with InfraRed’s appointment

The appointment of InfraRed concludes the investment management review announced by the previous board as reported on 25 March 2024. DGI9’s board firmly believes that the appointment of InfraRed will offer shareholders a variety of benefits during the implementation of an orderly managed wind-down of the company’s remaining portfolio of assets, which are listed as follows:

  • Extensive listed companies experience, as the manager of two of the largest and longest-established UK-listed infrastructure investment companies, given a combined market capitalisation of over £5.3 billion and HICL’s listing dating back to 2006.
  • Access to a team of highly specialised and experienced investment professionals for DGI9, headed by James O’Halloran, a partner in the European investments team with over 20 years of infrastructure investment M&A experience across a range of strategies, including flagship investment companies.
    • James played a key role in the launch of HICL in 2006 and has been leading its investment and divestment activities for the last 18 years. James has been responsible for the delivery of £2 billion of new investments and £1 billion of divestments on behalf of HICL.
    • Richard Crawford, who was previously fund manager for TRIG for 11 years and also worked with James on HICL’s IPO, will be providing support to the InfraRed team managing DGI9 in his capacity as senior adviser at InfraRed. These professionals will be supported by a strong, well-resourced platform of over 160 employees and partners.
  • Expertise in digital infrastructure having completed 8 digital infrastructure investments and bringing deep experience investing in and managing digital and telecoms operational assets and businesses, via core and value-add strategies.
  • Specific knowledge of Arqiva Group (“Arqiva”) with existing knowledge of its business plan, management team, and co-shareholders to seek to achieve maximum value from DGI9’s investment in Arqiva.
  • Strong track-record of accretive divestments, having disposed of £1.7 billion of assets since the start of 2023 at an 11% premium to carrying value, over five funds, three continents and across both core and value-add strategies. This also includes extensive experience of executing transactions on a stand-alone basis, drawing on deep relationships with a range of financial and strategic investors.
  • Highly relevant experience in delivering debt solutions for both listed investment companies and growth-orientated portfolio companies, with an in-house treasury function and deep lender relationships.

InfraRed’s terms of appointment

  • InfraRed will receive a fixed annual management fee of £3.75m for the first 36 months of InfraRed’s appointment and a reduced management fee of £1.75m per annum thereafter until the Group’s last asset is sold.
  • InfraRed has committed to use 10% of its annual management fee (net of applicable taxes) to acquire ordinary shares in the capital of DGI9 in the secondary market, unless it would be unlawful to do so.
  • Any ordinary shares acquired by InfraRed pursuant to these arrangements will be subject to lock-in and orderly market provisions.
  • Following the sale of the final asset, a fee of £100,000 per month will be payable until the earlier of (i) the company being delisted; and (ii) 6 months from the date of completion of the sale of the final asset.
  • To appropriately align InfraRed with DGI9 shareholder outcomes, InfraRed will also be entitled to receive a performance fee based on distributions made to shareholders in excess of £225m.
  • InfraRed will be entitled to a performance fee of 3.5% of any distributions above £225m, when aggregate distributions are in excess of £225m but less than £300m, and 4.75% of any distributions above £300m when aggregate distributions are in excess of £300m.
  • The terms of the new investment management agreement (IMA) provide that distributions to DGI9 shareholders will be assessed only after repayment of the company’s revolving credit facility, any third-party financing, and any accrued liabilities of the company.
  • InfraRed will also be entitled to receive certain fees in the event of the termination of its appointment in prescribed circumstances. Any performance fees payable to InfraRed shall not exceed, in aggregate, £15m.
  • The new IMA shall be terminable by either party by serving 6 months’ notice, with such notice not to expire earlier than 24 months from the effective date of appointment of InfraRed.
  • The appointment of InfraRed under the new IMA is conditional upon, inter alia, the required approval of the Jersey Financial Services Commission and the Financial Conduct Authority’s regulatory clearances to act as the company’s AIFM.

Comments from Eric Sanderson, chairman of Digital 9 Infrastructure

“We are pleased to welcome InfraRed as DGI9’s new investment manager and look forward to working with the team during the managed wind-down. Sale processes for DGI9’s wholly-owned assets are progressing, albeit at a slower pace than we had anticipated. I would like to thank Triple Point for cooperating with the Board in the transfer of responsibilities to InfraRed.”

Comments from James O’Halloran, partner at InfraRed

“InfraRed’s 25-year history as a value-add investor, including in digital infrastructure, coupled with its deep expertise as the long-standing manager of two pre-eminent listed infrastructure investment companies and successful disposal track record over the last 18-months, will be brought to bear as we seek to deliver for DGI9’s shareholders. We are looking forward to working closely with the Board to maximise shareholder value.”

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