The £435 million Utilico Emerging Markets investment trust is hoping to raise debt by issuing its own bonds, rather than borrowing from a bank.
The trust has told shareholders that it has appointed Canaccord Genuity to arrange a series of meetings with fixed income investors in the UK to discuss issuing sterling-denominated secured bonds.
‘In light of attractive rates currently available in the debt capital markets, [Utilico Emerging Markets] is seeking to secure longer-term fixed-rate funding for the purposes of pursuing the company’s investment objective over a significant period of time,’ the fund explained.
Utilico Emerging Markets has traditionally used bank financing for portfolio leverage; it is currently 5.4% geared.
Its sister Utilico Investments fund, which is also managed by Charles Jillings and owns almost a third of Utilico Emerging Markets, has used zero dividend preference shares for gearing.
Utilico Emerging Markets has been a strong performer, focusing its investments on emerging market infrastructure businesses such as top holding Malaysia Airport Holdings.
Over the past three years, the trust has returned 21% on a net asset value basis and 29% in share price terms, while the MSCI Emerging Markets index has dropped 8%.
Yet to gain support for the proposed fundraising, Utilico Emerging Markets has committed to offering shareholders a continuation vote before the bonds are issued.