The Rise of Platform Financing in Energy, Infrastructure and Beyond

The energy and infrastructure sector continues to evolve at pace, driven by the global push for energy security, resilient digital connectivity, delivery against ESG commitments and rapid technological innovation. These pressures demand the use of a full range of investment approaches (including “hybrid” structures) – and, as a part of this, we are seeing increased interest in platform financing.

Advising on Complex Infrastructure Transactions

Our Global Transactions team is at the forefront of platform financing across the infrastructure and energy markets. We support clients in structuring, negotiating and executing these arrangements, helping them unlock the benefits and navigate the challenges of this dynamic financing model.

A recent example is of our advice to PD Ports (owned by Brookfield) on its refinancing via a multi-sourced common terms debt platform, together with associated bank facilities and privately placed notes issued to US and European investors.

We also advised AGS Airports on its multi-sourced common terms debt platform refinancing. The transaction involved implementing a debt platform spanning bank facilities, institutional facilities and privately placed notes issued to both European and US investors.

These mandates highlight our team’s expertise in delivering modern financing structures for leading infrastructure businesses.

Why sponsors choose to set up debt platforms

• Efficiency and Speed: Platforms significantly reduce the time and cost associated with structuring individual project financings. They streamline due diligence and homogenise documentation, accelerating capital deployment.
• Scale and Diversification: Investors achieve greater scale and diversify risk across a portfolio of assets, effectively mitigating individual project risks.
• Cost Benefits: Sponsors benefit from lower ongoing costs as there is no need to renegotiate covenant packages each time new debt is incurred on an established platform, lowering legal cost.
• Operational Synergies: Managing similar assets under a single platform fosters shared operational expertise, procurement advantages, and economies of scale.
• Enhanced Flexibility: The common terms platform, in particular, allows for various types of debt to be incurred on the same platform, providing sponsors with substantial flexibility as well as facilitating a ratings uplift if features such as standstill, liquidity facilities and streamlined creditor voting are included.
• Capes Raise: platforms create the ability to raise capex on an ongoing basis which is required in respect of energy transition assets and digital transformation assets.
• Transparency and Governance: A common covenant package offers creditors greater transparency, while simplified voting mechanics and structural characteristics contribute to a potential rating uplift for the platform, benefiting the sponsor.

Why creditors choose to set up debt platforms

• Transparency: Creditors benefit significantly from the transparency of a common covenant package, providing a clear and consistent understanding of the borrower's financial health and obligations across all debt tranches.
• Voting Mechanics: The streamlined voting mechanics of a common terms platform promote simplicity and clarity in decision-making among various creditor groups, preventing potential disputes or delays.
• Liquidity: Dedicated liquidity facilities/reserves within the platform structure are often included as support during a standstill period to facilitate a ratings uplift.
• Standstill Provisions: It is common to include a standstill on any event of default, which can give creditors a structured period to assess options and coordinate actions, promoting stability.

Key Considerations

While there are many benefits to putting in place a platform structure, parties will need to consider the structural issues that may present by ring-fencing of the operating company, this ordinarily requires a regulation of distributions, disposals and acquisitions different to a corporate financing. The key challenges of a platform are time and cost required to implement, in certain cases this may require a company reorganisation to facilitate. The creation of a platform takes longer to implement than a bilateral loan facility and therefore has an increased cost. Sponsors will need to consider whether the quantum of debt raised justifies a platform.

Structure of debt platforms

Platform financing establishes a dedicated investment vehicle—a "platform"—to acquire, develop, and operate multiple similar assets within a specific sector or geography. This approach differs from bespoke financing for individual projects. The platform structure secures a larger, multi-creditor financing package by combining features of asset-level project financing with the flexibility typically afforded to borrowers and sponsors in the leveraged finance space.

A common debt and shared security package  underpins this structure, providing a combination of facilities to support both initial refinancing and future growth. These can include term facilities, institutional facilities (often with longer tenors), capex facilities for capital expenditures or permitted acquisitions, and revolving credit facilities for general corporate and working capital needs. The primary aim of such facilities is to refinance existing debt and support ongoing operational and growth requirements.

Platforms are documented through a "common terms platform." This framework comprises a Common Terms Agreement (CTA) and a Master Definitions Agreement (MDA), which standardises definitions, representations, covenants, and events of default (i.e. a common covenant package) across all secured debt. An Intercreditor Deed (STID) further defines creditor relationships and payment priorities, ensuring secured debt is generally treated pari passu and pro rata among creditors. This uniform approach integrates diverse debt providers and facilitates future additional indebtedness and hedging, all subject to specific conditions.

Converging Financial Worlds

As infrastructure investment evolves, infrastructure finance and leveraged finance are increasingly converging. Infrastructure investors actively seek debt terms historically reserved for private equity and leveraged markets.

This convergence impacts deal structures in several key areas:

• Streamlined Security: Borrowers are pushing for simpler security packages, reducing the categories of assets subject to fixed security.
• Covenant Flexibility: The framework acquisitions, disposals and raising additional debt is becoming more accommodating, with fewer caps on acquisition value, more common pro forma leverage tests, and less stringent requirements for targets to be EBITDA positive.
• Additional Indebtedness: Borrowers seek to raise further indebtedness outside existing facilities.
• Pro Forma Adjustments: Adjustments to financial covenant calculations now commonly incorporate projected cost savings and synergies from acquisitions, particularly in 'core-plus' infrastructure transactions.
• Equity Cures: The inclusion of "EBITDA equity cures"—allowing a breached leverage ratio covenant to be remedied by injecting new shareholder capital to boost EBITDA—is gaining traction, typically with usage caps.
• Debt Transferability: Negotiation points regarding borrower consent for transferring debt, even post-event of default, are aligning more closely with the leverage finance market practices.
• The lending landscape has diversified, beyond traditional commercial banks, a wider range of lenders, including private credit providers, are active. This is particularly true as 'infrastructure' expands to encompass energy transition, clean energy, and infrastructure-adjacent projects. This influx of capital and evolving investor mandates is pulling traditional infrastructure finance closer to leveraged finance models, resulting in more flexible covenants and documentation.