Managing banking relationships, subscription facilities, and cash management for infrastructure investments
Banking and treasury functions for infrastructure funds involve managing cash flows across long fund lives, coordinating fund-level credit facilities with asset-level project finance, and navigating multi-currency treasury operations that reflect the global nature of infrastructure investing. The scale of infrastructure transactions and institutional LP base typically provide access to sophisticated banking products, though the complexity of infrastructure structures requires careful coordination.
Infrastructure funds typically maintain relationships with multiple banks serving different functions. The fund's primary banking relationship handles day-to-day treasury operations and often anchors subscription credit facilities. Asset-level project finance involves separate lender relationships at each portfolio company. The manager's operating accounts add another layer of banking relationships.
Bank selection for infrastructure funds often considers:
Subscription facilities—lines of credit secured by LP capital commitments—are common in infrastructure funds, though usage patterns may differ from shorter-duration strategies. These facilities serve several purposes in infrastructure:
Infrastructure subscription facilities may involve larger commitments and longer tenors than facilities for shorter-duration funds, reflecting the extended investment period and larger transaction sizes common in infrastructure. Facility terms including advance rates, borrowing bases, and covenant structures warrant careful negotiation.
A distinctive aspect of infrastructure fund treasury involves coordinating fund-level activities with asset-level project finance. Most infrastructure investments include non-recourse debt at the asset level, creating parallel financing structures that interact in various ways.
Key coordination points include:
International infrastructure investments create multi-currency treasury requirements. Revenue, operating costs, and debt service at foreign assets occur in local currencies, while fund-level reporting and distributions may be in U.S. dollars or other base currencies.
Currency management approaches vary among infrastructure managers:
Infrastructure fund treasury must manage cash over investment periods and fund lives far longer than other private fund strategies. Cash balances may be held for extended periods awaiting deployment or during harvest phases as assets are sold.
Investment of fund cash balances requires attention to partnership agreement restrictions on short-term investments, liquidity needs for capital deployment and expenses, and yield optimization within acceptable risk parameters. The institutional LP base typically expects conservative cash management approaches.
Both fund-level facilities and asset-level debt create interest rate exposure. Subscription facility borrowings typically carry floating rates tied to SOFR or similar benchmarks. Project finance debt may be floating or fixed, with swap overlays common for construction loans that convert to fixed-rate structures at completion.
Treasury monitors aggregate interest rate exposure across the portfolio and may employ hedging strategies at either fund or asset level depending on overall risk management approach.
Banking and treasury functions support infrastructure fund operations throughout fund lives measured in decades. Establishing appropriate banking relationships, facility structures, and treasury processes from fund formation creates infrastructure for efficient operations over the extended time horizons that characterize infrastructure investing.