The effects on infra debt margins: A study on the components and long-term sustainability of the recent infrastructure debt margin shift

Abstract: This paper investigates the components of, and further assesses the long-term sustainability of, the recent infrastructure debt margin shift in developed European countries. This is done by collecting debt tranche characteristics data on infrastructure-defined projects in Benelux, France, Germany, the Nordics and the UK, spanning 1st January 2000 to 30th June 2014. By running multivariate, random-effects and difference-in-difference tests on gathered debt tranche data, results have been obtained. The paper shows: i) a change in overall demand for infrastructure debt investments; ii) private institutional investors expanding their market participation; and iii) more expensive pricing of maturity, post-financial crisis compared to pre- financial crisis. The Authors, furthermore, find an increase in the infrastructure debt margin justified. However, the exact margin level of a long-term equilibrium has to be further analysed.