APAC: JP Morgan looks to wind down first Asian infra fund

19 March 2018 - 12:00 am UTC

JP Morgan Asset Management is in the early stages of a complete divestment of its assets in the JP Morgan Asian Infrastructure & Related Resources Opportunity Fund I (AIRRO), two sources familiar with the situation told Inframation.

The firm is exploring various options for the fund, including a transfer to an unaffiliated successor manager and GP, bulk sale, and individual asset sales. JP Morgan’s Asian infrastructure platform also manages AIRRO II.

The 2008 vintage AIRRO I currently holds equity stakes in seven assets located throughout India, including stakes in toll roads, hospitals, wind power and thermal energy, according to Inframation Deals (see chart below).

The divestment is still “very early in discussions” and has the potential to go down any of the afore-mentioned routes, according to a source close to the situation. The source noted that an advisor has not been appointed for the divestment just yet.

Most of the assets face regulatory or financial hurdles to monetization and estimates for potential exits through normal sale processes are for two to three years, according to one of those sources.

AIRRO I’s broad mandate was supposed to facilitate asset sales. The fund does not invest at the asset or project level as these are difficult to exit in Asia according to another source. Instead it has invested in platforms which hold multiple assets. The fund has a mandate to invest in infrastructure as well as related assets, such as cement, construction, mining and steel companies.

The ten-year fund launched in 2008 and reached its USD 859m final close in 2010. It has a 19% target net IRR and a one-time two-year fund length extension. Fundraising for AIRRO II launched in 2013.

A co-investment vehicle – JPM AIRRO Indian Sidecar Fund – was raised for the two roads assets held by AIRRO I – Nandi Infrastructure Corridor Enterprises and Soma Tollways – which would make a sale of the fund more complicated as agreement from the investors would be required, according to a person familiar. “I believe the sidecar will be sold alongside the fund, which would be more complicated,” he said.

A source at JP Morgan said that he couldn’t confirm the divestment but acknowledged that the team has experienced some turnover in the last couple of months, after a long period of stability. 

Current and realized holdings
The exits realized from AIRRO I have been located outside India. These include 100% equity stakes in Eco Management Korea (January 2017) along with two China-based companies: Goldtrust Water  (April 2015) and Scitus Cement (January 2012).

The Indian rupee declined against the US dollar between March 2008 and May 2013, when the fund was actively investing in assets in the country. From a monthly average of INR 40.16 to USD 1 in March 2008 to INR 54.87 in May 2013, declining further to INR 63.93 in September 2013.

The table below describes five of the current holdings owned by AIRRO, according to Inframation Deals.

JP Morgan