The continuation fund holds transport and social infrastructure from the firm's first two North American funds. Counsel puts new capital at about $2.5 billion, and Meridiam says demand topped $7 billion.
Meridiam has given some of its oldest North American infrastructure investments a new owner and a much longer clock.
The infrastructure investor said it closed Meridiam North America Core Infrastructure Fund I at about $4.5 billion. The vehicle holds 15 operating transport and social infrastructure assets from its first two fund generations in the region. It is a continuation vehicle, a structure in which a manager moves assets from older funds into a new one, giving existing investors the choice to cash out or roll their stakes while new investors buy in.
The terms
As part of the transaction, Meridiam extended the life of MINA II, one of the source funds, to 45 years. Meridiam said demand exceeded $7 billion, about 1.6 times the size of the vehicle.
Gibson Dunn, which advised Meridiam, said the vehicle includes about $2.5 billion of new capital and holds assets in the U.S., Canada and Chile. That is about 56% of the total. The remaining roughly $2 billion would reflect capital from investors who chose to roll their interests, although Meridiam has not published the split.
Ares, GIC and Pantheon were among the backers. This is Meridiam's second continuation vehicle this year.
What was not disclosed
Meridiam did not say what price the assets moved at relative to their last reported value, how many existing investors chose to sell, or how the vehicle was allocated among buyers. Those terms decide whether the transaction was a full-value sale or a discounted one for the investors who took cash.
Asset life and fund life
Operating infrastructure, such as toll roads, transit and public buildings, often runs under concessions that last decades. Closed-end funds have much shorter lives, which can force a manager to sell assets earlier than their contracts run. A continuation vehicle with a 45-year life lets the manager keep holding them while giving older investors a way out.
Two readings
One reading is that demand of more than $7 billion for a $4.5 billion vehicle shows deep appetite for long-dated, operating infrastructure, and that continuation funds are becoming a standard way to match fund life to asset life.
Another reading is that continuation vehicles let a manager set the price on both sides of the trade, and that without the pricing against net asset value, the strength of demand says little about whether investors who sold received a fair price.
The details to watch
Any disclosure of the pricing against net asset value and of election rates would answer the central question. Further continuation vehicles from Meridiam or its peers in infrastructure would show whether this structure becomes routine for long-life assets.