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Brookfield-Backed Group Seeking $8 Billion in Funding for Pipeline Deal

By Matthew DiLallo – Apr 20, 2020 at 11:55AM

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The investment consortium is looking to buy a stake in gas pipelines in the Middle East.

A group of investors -- which includes Brookfield Asset Management (BAM 0.42%)-- are working to line up bank financing to buy a stake in natural gas pipelines owned by the Abu Dhabi National Oil Company (ADNOC). The consortium has reached out to banks for roughly $8 billion in loans to finance the transaction, Bloomberg reports. The deal would be the largest for an infrastructure asset this year if completed. 

The consortium is the last remaining bidder for a stake in ADNOC's gas pipeline business. The company is looking to sell a 49% interest in the unit via a lease structure, which could value it at as much as $15 billion. The transaction would enable the company to bring in cash at a time when energy prices are cratering due to the COVID-19 outbreak.  

A globe sitting on top several foreign currencies.

Image source: Getty Images.

The deal's lease structure appeals to infrastructure investors because they can earn a guaranteed return. Last year ADNOC completed a similar transaction with KKR (KKR -0.69%) and Blackrock (BLK -2.42%). The pair invested $4 billion for a stake in its oil pipelines, securing a guaranteed return for the next two decades. 

That return profile should make it easier for the Brookfield-backed group to obtain bank financing for a large portion of the transaction value. That bank funding will enable them to leverage the return they earn on the investment. Further, by keeping their equity commitment low, it would free up capital to invest in other opportunities that will likely arise as a result of the COVID-19 outbreak and its impact on the global economy. In Brookfield's case, it had more than $12 billion of dry powder at its listed partnerships and tens of billions more in investor capital within its private equity funds. 

Matthew DiLallo owns shares of Brookfield Asset Management. The Motley Fool owns shares of and recommends Brookfield Asset Management. The Motley Fool recommends KKR. The Motley Fool has a disclosure policy.

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