USPP aims to keep innovating as the ‘R&D of capital markets’
The US private placement market is famous for its stability and consistency. But beneath the surface, much is changing. Last year issuance hit a record of $65bn, even though deal flow from continental Europe ebbed.
New money is flowing into the market, through portfolios managed by the 50 established investors. And they are keen to try new things: structured and project debt, lower rating bands and emerging markets.
In March, two placement agents, an investor and an issuer discussed the USPP’s continued competitiveness and potential sources of deal supply with GlobalCapital in New York.
Participants in the roundtable were:
Scott Dainton, head of Americas debt capital markets, ING
Chris Davies, CFO, Global Container Terminals
Chris Lyons, managing director and head of private credit, Voya Investment Management
Peter Pulkkinen, managing director, private placements, BNP Paribas
Richard Metcalf, moderator, GlobalCapital
Peter Pulkkinen, BNP Paribas: Historically, the USPP market has always been a pretty innovative market. Sometimes folks call it the R&D of the capital markets and I think that’s probably true. If you look at the crisis in ’08 and ’09, the private placement markets very, very briefly shut, if at all, versus the public markets. So we see strong demand even through those cycles. The market and the investors have been through multiple cycles, and they’ve all developed their own strategies that work. It’s hard to argue with the success they’ve had in terms of outperformance versus other indices over the years, and as a result they tend to be braver in the sense of listening to new credit stories.
I joined BNP Paribas from UBS, and at UBS we were doing some cutting edge-type structures and transactions that could either be done as loan notes or traditional USPPs, so it straddled that market. If you were doing something a little bit shorter that was asset-based, you might do a loan evidenced by note, a fixed coupon-type loan. And that was a unique learning experience: the private placement market doesn’t just want to buy private placements.
And so, returning to your question, we’ve got some European mandates right now that we’re working on in the infrastructure space that we look at and we say to ourselves, ‘OK, how do we think this deal gets done?’ And almost every investor, certainly the top 10, all say, ‘Well, even if it’s not going to be a private placement, don’t not call us, because we actually want to see any and all kinds of product.’
So, where do I think some of the demand is going to come from? Well, at BNP, we have one of the biggest prime broker operations in the world, so we and others have been successful in finding ways to term out some of that margin financing. I think the USPP market likes that story for the right types of funds. And that is a way of effectively replacing the locked up margin and effectively creating product that the USPP investor base wants to see.
I think renewables is going to be a big push as well, and project finance, you’re going to see a tremendous amount more product coming out of that space. And for those types of structured deals with the right story behind them, the USPP market is pretty receptive.
Chris Lyons, Voya Investment Management: Peter, you’re right. We’re seeing more supply across both renewables and more traditional projects. We love hard assets and we certainly understand structure. The larger, more sophisticated shops have in-house counsel that have the ability to document the business correctly and create solutions.
The other side that I think will grow is non-dollar deals. Today the US dollar to non-dollar split is around 85 to 15. When we look out five years from now, I think that number will be more like 65 to 35.
I think outside of cyclical ups and downs, we’re tapped out for US corporates. Where the growth can come from is disintermediating other local markets. If you’re an Australian issuer and you can get 12 year money out of the US investor base, but get it in Aussie dollars, why do a deal in the local market for seven years?
Chris Davies, Global Container Terminals: I would totally agree with that too. Our first deal, when going into the market a couple of years ago, was in US dollars, but as part of doing that we found that there was an appetite for Canadian dollars. The second time around it was Canadian dollar financing that we needed to do, and the appetite was very impressive, where the investors either had natural demand for Canadian dollars or they did a swap on the side, but it really simplified things from our side.
Lyons, Voya Investment Management: It’s more efficient for us to take that swap on our balance sheet than for you to take it on your balance sheet. I think that’s what people have realised.
Davies, Global Container Terminals: It absolutely was from our perspective.
Scott Dainton, ING: Our own data shows that something like 84% of the market is still US dollars and the balance is pound sterling, euros, Aussie dollars and New Zealand dollars and a tiny bit of Japanese yen. So that is definitely a place where the market could grow, inasmuch as each and every player can go ahead and do a swap themselves.
It’s been interesting to see the evolution of who could do it and who really couldn’t do it. I remember we were making calls during the middle of the financial crisis and nobody was doing it at that point. They didn’t want it on their books, they didn’t want the mark-to-market. Then certain institutions stepped up to be able to do it, as a competitive tool to be able to get better allocations on transactions. And now most of the big guys can do it.
I just spoke to an investor a couple of weeks ago — I put them in the mid-tier category — who notoriously couldn’t do any other currency. Finally, they’ve announced that they can. They started doing it last year, and they’re doing it in size. So that could be a differentiating factor for the market.
On the supply side, there are a couple of things that could affect the market, but I’m not confident that the market is there yet for them. One is more cross-over credits, or NAIC 3 credits, coming to the market.
When I look at volume, 95% of the market is NAIC 1 or NAIC 2, with 5% NAIC 3. So it’s a very, very small sliver. We’re constantly seeing credits pass our desks that are definitely a little cuspy, that might be in that double-B, double-B plus area, and there isn’t anything wrong with them.
What we hear from the buy-side is: ‘Yes, we’re doing NAIC 3s. Yes, bring them.’
Then, when you do, pricing is all over the place. It’s not an efficient market, because one investor will say: ‘We need 75bp back from where a triple-B minus gets done.’ And then the next investor says: ‘We need to price against where the high yield deals get done.’ So it’s difficult to know where to price a deal, and some deals come to the market and you don’t hear about them again, which means they get pulled. So I think there’s intent from the investors to do NAIC 3s, but they’re not doing enough of them.
Lyons, Voya Investment Management: There’s so much competition for direct middle market lending. Some funds have been raised, and we do high yield as well, but you’re right — the focus of each shop is different.
We’re looking to make 7%-9% unlevered, so we’re not in that sweet spot where you’re going to bring that cross-over. We’re not going to expend that very precious resource of below-investment grade exposure, particularly at this point in time. We’re at 3% and we can go to 8% for the general account. We’re holding it until the turn and then we’ll go spend the money.
As a manager, you have to have to think about the scarcity of the resource, and when you’re managing money for insurance companies, below-investment grade appetite is a very scarce resource.
Dainton, ING: It’s hard to say without knowing what the reserve requirement is going to be, particularly for the NAIC 3s. But inasmuch as a three doesn’t get thrown into a capital charge of 4.6%, if an NAIC 3 plus is only 3%, yes, it could.
Lyons, Global Container Terminals: If the differentiation between triple-B minus and double-B plus closes as a result of the stratification…
Lyons, Voya Investment Management: It’s a cliff. Then, I think you would see some increased appetite. But US insurance companies have a lot more stakeholders than the NAIC — rating agencies, shareholders — and so it’s not just the NAIC capital charge, not that that is not important. We focus on capital efficiency to the nth degree at Voya and it’s definitely a big input, but there are also other controls that affect it.
All other things considered equal, yes, I think it will increase appetite for NAIC 3s. It might create a little more difficulty, depending on how it comes out for pricing, if you’re in the NAIC 2 minus category, because I think it is going to increase the cost of capital for triple-B minus, which is historically where the private placement market is fed — triple-Bs and triple-B minuses.
Dainton, ING: I think that we cover the market well with everything from manufacturers to distribution companies, financial plays, infra plays, ports, anything in the infra world, airports. We brought a credit which was clearly an NAIC 3, about a year and a half, two years ago, pharmaceutical compounding, never seen in the market before. So once in a while we do.
Pulkkinen, BNP Paribas: I agree. I think it is going to continue to be fragmented with regard to the new things that pop up. We’ve done everything from talent agency monetisations to tobacco royalty monetisations to streaming video-on-demand monetisations in the US private placement market over the past few years. I think each one of those is a story, and so it’s always approached in a club style, where you reach out to two or three folks, expand it if you need to.
Davies, Global Container Terminals: From our point of view, any time we need to go to the markets we would be looking at alternate sources of capital, and so far the private placement market has been fantastic because of the ease of entry into that market. One thing that was very impressive was the time that investors take to really understand the story.
In the very first roadshow that we did, everybody took the time to really understand us — our investments are in New York harbour and Vancouver harbour, so you’d naturally think that everybody would understand New York harbour a little better — but that wasn’t the case. They really took the time to visit the assets and to also understand what we had in Canada. It was really impressive.
Dainton, ING: A good question. You see the same countries again and again. The US is 60% of the market and the rest of the world is 40%. But that rest of the world is really just the UK, Australia, continental Europe and a smattering of other countries.
I remember about two years ago we had an investor who wanted to double or triple the amount of privates they’re doing and we said: ‘Oh, would you be willing to do this, this, this or this?’ And they said: ‘No, no, no, no.’ Okay, so how are you really going to double or triple your volume? So we started a conversation about Southern Europe — which went through a horrible period but some of it’s coming back — and some Italian deals have been getting done for the last few years.
There are some jurisdictions that investors are still queasy about going to at all. I’d put all of Southern Europe in that group right now. Latin America, too, unless it’s Chile. Do we see one deal a year from Costa Rica or one from another Latin American country? Yes, but we don’t see a lot of them.
Lyons, Voya Investment Management: It has to do with an improvement in the ratings quality of the underlying countries over time. I spent 1995 to 2000 in Latin America doing deals. The vast majority of them were some kind of future flow securitization to pierce the sovereign ceiling, or IFC-backed with some kind of structure around them, but at one point, out of our $25bn portfolio, we had $1.5bn of Latin American private placement loans. So it’s been there. There’s no fear of going to those jurisdictions. It’s just that the credit rating of the economies has gotten better and so they issue in the public markets.
When you see the deals that Scott is talking about, there’s a hiccup in the country, the public markets close and they come to the private market. So that’s really the hold-up, I think, for Latin America.
And whether you’re putting a document under New York law or not, the private placement investor is always going to look at the rule of law in the country, and if they don’t feel good about that, then it’s going to be much more difficult to do a deal. A lot of people look at Australia not just as a play in Australia but a play into China. They won’t lend into China because they’re afraid if something goes wrong, they’re not going to be treated very well at the table. It’s not a lack of willingness to look at the jurisdiction, it’s just, do you want to lend money there?
And we’ll even bifurcate it to the extent that, for instance, UK law is the most debtor-friendly. We will lend money in France but we are going to be more defensive in the industries that we lend to, to protect our investors and our clients.
Dainton, ING: We have not seen really any effect. There were minor questions after the Brexit vote, which just shocked everyone. It had less to do with swapping, and more to do with the credit itself and how that credit is going to be affected by an exit out of the EU. We heard some of that, but it was really business as usual.
Pulkkinen, BNP Paribas: I would agree with that. We’re more focused on how it affects the individual credit. The private placement market wants to get paid for complexity, not for additional credit risk.
Overlaying all of that, certainly in Europe, the negative basis between swap rates is really what’s driving the competitiveness of the US private placement market in non-dollar currencies. When or if that goes away, we’ll have a different conversation.
Lyons, Voya Investment Management: If you look at the market, historically and still today, it’s a US insurance company-dominated market. The industry will do anything from three to 30 years in term, but 80% of issuance is seven to 15 years. That gives you a duration of a new production portfolio each year in today’s rate environment of about 8-1/2 years. Go and look at the liability duration of the big US insurance companies and it matches up nicely. So from an asset liability management (ALM) standpoint, a ratings requirement and a capital efficiency standpoint it matches with US insurance companies very well.
Within the US insurance market, there are three tiers of investors. You’ve got tier one — that’s eight, arguably 10 investors. Those are institutions that are going to have high quality in-house legal staff, big underwriting teams and also the ability to handle problems when they come up internally. You can call that workout groups, special assets, but they are people that focus on things when they go offside. Those investors can lead deals and lead events.
Tier two are folks that can put a decent amount of money into a deal but don’t carry the staff. They’re not going to lead a deal but they provide important money, call it $20m-$75m. And then you have what I call tier three, which are institutions that are providing less than $20m. In all, call it around 50 investors.
The change that has started to happen over the last five years has been other types of investors coming in. Five years ago, we managed money for our general account only. Today we manage money for the general account, obviously, but also US defined benefit plans, US defined contribution plans, other US insurance companies and international insurance companies, both European and Japanese. We’ve gone from one client to over a dozen clients in four years. And to give you an idea of the effect, we invested $4bn last year. Of that, $3bn is for the general account and $1bn is for those third party accounts. That’s significant. That’s significant additional demand from my book coming from non-traditional investors.
It’s going to take a long time until you have enough European or Japanese investors to say: ‘I want that currency,’ and they generate enough demand to create the deal in that currency for themselves, but I can see that down the road.
Dainton, ING: We look at the market the exact same way, and as Chris mentioned, we’re starting to see a couple of the big European guys come into the market in a big way, for the right credit, where they’ll step up for $100m.
We’re circling up a deal right now that’s interesting. It’s a cuspy type of credit and it’s a non-rated infra deal, so kind of unique. Usually infra deals come with one rating. We have one of those big European guys looking at the euros on that. So it’s evolving slowly. What you don’t see in our market is that there are 10 new investors in the market. You just don’t see that.
Lyons, Voya Investment Management: You have new investors, but Scott doesn’t view Voya as my general account and 12 external clients. He views it as one investor, one investment manager. The market is growing more than people think in terms of new investors.
Dainton, ING: If we take a bid from Chris and we allocate $75m to him, it might go in 10 accounts, 10 different investors, technically, but we only look at him as one investor.
Lyons, Voya Investment Management: Yes.
Davies, Global Container Terminals: That’s the beauty from my side. I just see the deal.
Lyons, Voya Investment Management: And the way the investment management agreements work, he would never deal with my third party clients.
Pulkkinen, BNP Paribas: Last year, European issuance was about 30% of the market, with the US and Canada being about 58% and Australia around 11%. I think you’re right, and the Schuldschein market is really driving it, much more than the European private placement market.
The European private placement market last year was about a €3.5bn-€4bn market, and that was about 40% less than the year before. The Schuldschein market on the other hand was about €26bn-€27bn last year and has steadily increased over the past five years. It’s a great market for the right kind of issuers. It’s clearly an investment grade issuer market. It’s clearly a market that has very straightforward docs. There are no real covenants to speak of in a lot of these Schuldscheine, and it’s a format and a structure that’s comfortable to a lot of the banks and others that are buying the underlying.
At BNP we pitch across products, and Schuldschein is a great product for a fair amount of issuers. USPPs offer greater duration and a little more structural complexity. In terms of the format, whether it’s amortising, added delay draw features, cross-currency, I think the USPP market offers some solidity there.
I would also say that the USPP market offers European issuers a lot from a diversity perspective. You have a whole new base of buyers that you can develop relationships with. USPP investors will go and visit these credits if they happen to be in that jurisdiction on some other business.
So I think there are a host of reasons why USPPs remain popular, but it’s very competitive. We talked about the negative basis — that’s obviously a big factor driving it.
I would point out, however, that we haven’t seen Schuldscheine survive a cycle. That’s something we talk about. It’s great to get away with no covenants, but when you go through a cycle and your market blows up and your investors never come back, I’m not saying that’s what will happen, but it’s unknown.
Lyons, Voya Investment Management: It was mentioned earlier that there’s a proven track record of the US private placement market outperforming the public comparables. We’ve tracked total return for 14 years since I took over the group, and we run it to a public benchmark that’s widely used. Over 14 years, we’ve outperformed that index by about 130bp a year, and that’s split between the upfront yield advantage and back end protection that you get through lower losses.
We’ve had net losses of, on average, 2bp for the past 14 years. I am not someone that believes that the private placement investors, myself or the other tier one investors that drive the market, are going to back away from that covenant protection. That’s what those external clients are hiring me for and so that is a limiter on the growth of the market.
Lyons, Voya Investment Management: There is a premium, but I do not believe it’s a liquidity premium. I believe it’s an opportunity cost premium.
When you’re managing a portfolio, if you need to reallocate, if you need to sell some bonds for portfolio purposes, you can execute. I know we can execute. We’ve done it. There’s not a lot of trading that goes on in the market because people manage on a buy-and-hold basis to capture all the benefits of the product, but I can go out and sell my $4bn of electric utility bonds, if I thought that was a rich market, and I would have bids and I could sell it.
But if I turned around and said energy is cheap and I want to buy energy, I’d hear crickets on the other side. That’s what limits the size of the float in the market and gives it the appearance of illiquidity. We had a third party client 10 days ago come to us and say: ‘I’m reallocating from fixed income to another asset class, we need you to reduce the portfolio by 10% and we need the money in 12 days,’ and we provided that to them.
What you’re really getting paid the additional spread for is related to opportunity cost, not illiquidity. All investors believe their in-house public bond desks can generate alpha to whatever index they run to. Same goes for investors who hire outside managers for IG publics. They believe their manager selection skills are such that their manager will generate consistent out-performance. If they didn’t, they would just buy the index.
When your private is bought an investor is allocating away from IG publics to the private market. In making that investment decision on the margin he is forgoing the opportunity for his public bond manager, be it internal or external, to generate alpha through sector rotation, name rotation and other methods. In order to give this up the private investor must receive compensation and that comes in the form of extra spread that you earn by buying and holding the bonds over time. If you look at the 10 year performance of an IG manager in the top quartile, he’ll generate 80bp-100bp over his public index on a total return basis and it is no surprise that the broad private market generates about the same “alpha” to the index over a long period of time, with about half of this coming in up front spread and the other half in non-coupon income and lower losses.
Dainton, ING: I think there’s still a premium to the market.
Lyons, Voya Investment Management: Oh, there is, and it’s definitely come in.
Dainton, ING: I think it’s an art, not a science and it’s credit-dependent. For the better credits, there’s less of a premium. When I first got into this business, which is 28 years ago, everyone said that premium was 30bp-50bp.
Lyons, Voya Investment Management: The total return metric that I’m talking about incorporates lower losses over a long period of time and non-coupon income such as amendment waiver fees that public bonds don’t generate because they don’t have covenants.
Dainton, ING: There’s no doubt in my mind that there’s still some premium, and what that premium is depends on sector, credit, maturity, the way the wind is blowing.
Pulkkinen, BNP Paribas: It’s also a function, agreeing with you both, of picking your comparables on the way in. In a technical situation, if you’re in a drought and there’s no product, nobody has any books on their desks, and then a deal comes, people are like: ‘Wow, this looks great, a non-cyclical food company, I’m going to pick comps that are aggressive internally.’ Right? Because you’re trying to get there. And somebody could pick a different stream of comps.
Lyons, Voya Investment Management: I think that the spread advantage has come in about 30bp from the long term average in today’s market; however, the excess return that comes over time from non-coupon income and lower losses than IG publics has not compressed.
The fluctuation in the upfront spread advantage is primarily related to how open or aggressive the public bond market is at any point in time. Today the public market is wide open and that is going to reduce private supply and compress spreads or cause private investors to be more aggressive on price to keep a borrower in this market.
We follow spreads to publics every year and 2005, ’06, ’07 were well below our long term average. And the same thing before the 2002 to 2003 recession. You have two or three years now where it’s been below that run rate. And I could start to make an argument that we’ve been tracking it a long time, that it’s a leading indicator of trouble in the credit markets. It’s been too low for too long, which just means that demand is overpowering supply.
Pulkkinen, BNP Paribas: I would point out that there are a bunch of private placements that we’ve done that would never get done in the public markets, so you look at that and what is the premium? The premium is you got a deal done versus not being able to get it done. And I don’t want people to read this interview and think: ‘Geez, it’s always going to be wider,’ because there’s plenty of instances, quite frankly, where, when you adjust it, it’s actually inside where a public is, and that’s a function of supply and demand. If you’ve got strong technicals, it’s going to clear where it clears.
Pulkkinen, BNP Paribas: In a very low rate environment with a positively sloped yield curve, you’ll get a wider premium for shorter tranches than longer tranches because the demand is much greater as people want to go up the curve. That exists today. If you do a seven year tranche, you are going to get a higher spread over publics than a 15 year tranche in almost any deal.
I think the risk on the way up is that we’re going to find out that a lot of issuers had pre-funded what they need, and you’ll see a drop in overall issuance.
Dainton, ING: Peter brought up a really good point about structure, because structure really matters and some of the deals we’ve been working on have really weird amortisation schedules that are, for instance, 20 years with an 11.2 year average life. That’s not a public deal. There’s more structure around it. That’s a hallmark of the private placement market.
Pulkkinen, BNP Paribas: And issuance is easy once you get your initial deal done, right? Doing the initial deal can be difficult because you’ve got to create the note purchase agreement and everything like that, but as long as your NPA investors believe it still applies to your business, then you can raise a significant amount of fixed capital very quickly and at low transaction costs. That’s why people, once they use it they come back again.
Davies, Global Container Terminals: We’ll do the exact same thing. The first deal took a little bit of time and after that, the second one was very, very simple.
Dainton, ING: Where you’ve seen the premium come in the most has been on infra, and what we are seeing is the debt funds that have been raised to focus strictly on infra show up in some of the private placement deals, so there’s more demand there.
I’ve been doing deals with construction risk for 25 years. You have to look at it logically and thoroughly, just like any part of the equation, and you’ve got to get fair pricing for that.
Yes, we’re competing with banks, but remember the ALM is very different. Your typical project finance coming out of the private market is going to be a 20 year final, 12 year average life, something like that. That’s just too long for a bank balance sheet at the end of the day.
Dainton, ING: Yes.
Pulkkinen, BNP Paribas: BNP is a pretty big project finance house and we were approached by a number of insurance companies asking — which I think is very thoughtful — ‘can we help you in backstopping some of these facilities?’ And the idea behind that is to get allocation on a term-out, so I think it’s complementary. I wouldn’t necessarily think it’s competitive. I think both sides bring different things to the equation. Some of the big Canadian pension funds have been direct investors on the equity side and on the mezzanine side and are now doing private placements as well, which is great.
Dainton, ING: I know our own banking guys on the infra side definitely feel there is a competitive player coming in and taking business away from them. Those guys are definitely making a stab at doing stable financing on certain projects, and then it kicks the banks out on day one. We are seeing some of that and there are some of our own infra guys that complained a bit about that. It’s another competitor to them at the end of the day.
Pulkkinen, BNP Paribas: The private placement investor base has so much experience over so many different credit cycles and so many different arenas in project and infra that, quite frankly, they get there pretty quickly in terms of the trade, in terms of understanding the credit. I think they get it a lot faster than what you would call relationship lenders. We’ve seen it on a couple of deals we just did where these private placement guys get up the curve very quickly.
Pulkkinen, BNP Paribas: I think it’s really well positioned. If you look at Australia and Canada in the P3 space, USPP guys have been pretty active. People are excited about the opportunity of having real, authentic P3 deals done in the US and I think you’d have a lot of capital deployed. But, as Scott mentioned before, some of these big European investors in infrastructure, it would be kind of ironic to start seeing them investing over here in some of our P3 deals, but I think you’d see it.
I also think renewables, as a bank that’s got a strong commitment to sustainability, is exciting. We did a solar deal last year for Exelon which was distributed generation, which was effectively a back-leveraging of a large portfolio of assets in five different states at the municipal level. From our perspective, that was a really neat transaction, in the sense that you got investors big and small coming into it. You saw that this really is, like we said, the R&D of the capital markets. It was the first deal of its type, and to see people apply, as Chris was saying, sets of criteria that they had learned in one space and honing it with a lot of in-house knowledge was exciting. It’s exciting to be on that cutting edge.
Lyons, Voya Investment Management: Certainly there’s an increased focus on environmental and social risk (ESR). For us, since others are focused on it, it’s a net positive, but at the end of the day the deal’s got to stand on its own. Nobody is going to do a deal that doesn’t look like it’s fairly priced because it’s green. But yes, it’s viewed positively not just by our general account client but other clients as well.
Dainton, ING: We just closed a transaction for Alpha Trains and it was a green USPP. A little bit of a story behind it, we were intending to go to the Euro PP market and the USPP market at the same time and we decided the Euro PP market would come in a bit disadvantaged with regard to pricing. We thought at the time it could be as much as 50bp higher, so we scrapped that. But we did the whole green bond exercise specifically for the Euro PP.
So we had the certificate and we put it in the roadshow presentation and we said to investors, ‘look, it’s going to be a green bond’. And just being brutally honest, I don’t think anyone cared at the end. I think investors kind of like the idea. Maybe in some boardrooms there is more of a feeling that we’ll feel better about doing this, it’s green, fantastic, a green certificate, but Chris is absolutely right — it needs to have the right structure and the right pricing. The question that we’re trying to figure out internally, because we’re doing a lot of green stuff in our European operations, is: is there a pricing differential? And the answer right now, we think, is no.
Lyons, Voya Investment Management: I would second that, but try showing them a coal-related power deal and have them tell you: ‘We don’t care that it’s coal. It’s good.’ You’re seeing the negative enter the room on other stuff before you’re seeing the positive entering on green. So it’s not like you’re getting a big pricing incentive on green because it’s green, but you’re getting your deal done.
Pulkkinen, BNP Paribas: We cut it down, when we look at utilities, to the generation mix, and if it’s heavily coal we’re out. We made that call 10 years ago.
Dainton, ING: It’s a Luxembourg-based company but it’s really, to me, a German company.
Dainton, ING: There are some green-focused investors, and we got the green certification because the refinancing was for a boatload of assets that were being refinanced, and they were all electrified trains as opposed to diesel.
Lyons, Voya Investment Management: Ten years from now we’ll look back and the question you’re asking today might have relevance. ESR is pushing into the public market psyche. It will make it to the private market at some point. It just hasn’t made it yet.
Davies, Global Container Terminals: ESR is very important to us. Most industries have an organisation that sets standards and for us it’s called Green Marine. We joined that organisation to demonstrate our commitment to ESR and we get publicly audited to those standards, so it’s part of our story.
Lyons, Voya Investment Management: Yes, it can affect your financial performance, in which case then it does become an issue automatically.
Lyons, Voya Investment Management: Yes, I agree.