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USS provides class B inflation linked financing to Affinity Water

The Universities Superannuation Scheme (USS) has provided GBP95m of 20-year, class B inflation linked financing to Affinity Water Programme Finance via the private placement of an index linked note. 

The financing was arranged by USS Investment Management Limited (USSIM), USS’s principal investment manager and adviser who will manage the investment on USS’s behalf.
Long-term inflation linked infrastructure debt is attractive for USS given that it shares similar characteristics to USS’ pension liabilities.  In a period where government bond yields are low, infrastructure debt provides an attractive premium to current bond yields as well as providing inflation protection for USS.
Gavin Merchant, senior investment manager infrastructure at USSIM, says: “Our investment philosophy is based on building strong relationships with a select number of core infrastructure companies. In doing so, we hope to be able to work with the management team of these companies to offer a unique and flexible source of long-term financing. We see these relationships as long-term partnerships, where we can potentially provide capital for future financing requirements of the business.”  
Richard Bienfait, chief executive of Affinity Water, says: “We are delighted to borrow long-dated and index-linked class B debt from such a high quality institution as USS. Their long-term belief in our company, alongside that of the investors who provided our Class A debt, means we can focus our efforts on our vision to be the leading community-focussed water company in the UK.”

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