The African Development Bank, the European Commission, Mariner Investment Group, Africa50 and Mizuho International plc, on Tuesday announced the pricing of Room2Run, a US $1 billion synthetic securitization corresponding to a portfolio of seasoned pan-African credit risk.
Room2Run is the first-ever portfolio synthetic securitization between a multi-lateral development bank and private sector investors, pioneering the use of securitization and credit risk transfer technology to a new and previously unexplored segment of the financial markets.
Structured as a synthetic securitization by Mizuho International, Room2Run transfers the mezzanine credit risk on a portfolio of approximately 50 loans from among the African Development Bank’s non-sovereign lending book, including power, transportation, financial sector, and manufacturing assets. The portfolio spans the African continent, with exposure to borrowers in North Africa, West Africa, Central Africa, East Africa, and Southern Africa.
Mariner, the global alternative asset manager and a majority-owned subsidiary of ORIX USA, is the lead investor in the transaction through its International Infrastructure Finance Company II fund. Africa50, the pan-African infrastructure investment platform, is investing alongside Mariner in the private sector tranche.
Additional credit protection is being provided by the European Commission’s European Fund for Sustainable Development in the form of a senior mezzanine guarantee.
“Room2Run gives us fresh resources to invest in the projects Africans need most,” said Akinwumi Adesina, President of the African Development Bank Group.
“Africa has the most promise, the greatest natural resources, and the world’s youngest population. But we also have the world’s most persistent infrastructure deficits. The African Development Bank has the strategy to address these infrastructure finance gaps—and Room2Run gives us the capacity to make it happen,” he added.
Structured as an impact investment, Room2Run is designed to enable the African Development Bank to increase lending in support of its mission to spur sustainable economic development and social progress. In connection with Room2Run, AfDB has committed to redeploying the freed-up capital into renewable energy projects in sub-Saharan Africa, including projects in low income and fragile countries.
“On the Impact scale, Room2Run is off the charts,” said Andrew Hohns, lead portfolio manager and head of the Mariner infrastructure investment management team.
“Room2Run answers the call of the G20 for private sector participants to step in and facilitate development finance, providing a template for attracting significant private sector capital into urgently needed projects in developing economies,” he further explained.
Raza Hasnani, head of infrastructure investment at Africa50 commented, “Room2Run provides an innovative and commercially viable solution to the African Development Bank’s risk management and lending objectives while paving the way for commercial investors to support and benefit from the growth of infrastructure on the continent.
“Africa50 is very pleased to participate in this landmark transaction, which is in line with our mandate to drive increased investment in infrastructure in Africa, and to create pathways for long-term institutional capital to flow into this space.”