Hitting the Supply-Demand Sweet Spot

After recognizing a gap in financing midsize infrastructure projects, the duo behind Stonebridge Financial has capitalized on the opportunity, growing assets and catapulting a necessary niche service

Seventeen years ago, when they were both working at a Canadian life-insurance company, Bob Colliver and Denis Bourassa had an idea.

“We saw an opportunity to launch our own specialized firm in the Canadian private-debt market, to assist clients by arranging financing tailored to their needs, and to bring well-structured, long-term private-debt transactions to the institutional market,” Colliver says.

Today, the partners and co-CEOs’ company, Toronto-based Stonebridge Financial Corporation, facilitates and syndicates private-debt transactions. “Not too many institutions are doing what we’re doing,” says Bourassa, who explains that if a company is looking for a creative financing structure to develop a project, Stonebridge can develop a customized solution.

The company, which finances energy- and community-infrastructure projects (such as the creation of hospitals, highways, and municipal buildings) during and long after construction, was immediately successful in the health-care space, financing roughly 25 percent of the beds in an Ontario government project to build long-term-care facilities, and over the years, it has expanded well beyond that to include other infrastructure assets and renewable energy.

It now focuses on the financing of midsize projects because there’s a supply-demand gap in this so-called “second tier”—unlike billion-dollar deals, where there is significant competition. In March 2015, for example, the firm provided debt financing for 78 of Firelight Solar LP’s rooftop solar projects, totalling $97.4 million. In December 2014, it provided $11.1 million of construction and takeout financing for BA Wind LP’s Aulds Mountain Wind Farm project in Pictou County, Nova Scotia.

In 2001, the firm added an Oakville, Ontario-based lease-financing group that offers a simple approach to funding and administering asset-backed lease portfolios. Essentially, Stonebridge provides financing to leasing companies that allows them to borrow against the future cash flow of their lease portfolio. Clients maintain a direct relationship with their lessees—pricing, negotiating, and collecting lease payments—but optimize their cash flow by locking in lease profits at the time of funding.

In 2012, the firm further evolved with the launch of Stonebridge Infrastructure Debt Fund I LP. The $201.5 million closed-end fund, developed with the support of PPP Canada, provides its institutional investors with access to investment-grade, private-debt-market assets (such as hospitals, long-term-care facilities, schools, correctional facilities, and renewable-energy projects) with long-term, predictable cash flows and premium returns over comparable government bond yields. With that fund fully invested, in November 2014, Stonebridge launched a second fund, for which it is currently raising capital. Now that fund has $230 million under management, and Colliver sees growth potential to $1 billion in the next three to five years.

The firm also offers advisory services on a wide range of projects, from highways to waterfront redevelopments, consulting with clients on everything from optimal financing structure to contractor selection and due diligence. “We help our clients determine their objectives, assess their risks, and come up with the optimal financing structure,” Bourassa says.

The business model is clearly working: from zero dollars in assets under administration in 1998, Stonebridge has gone to $2.8 billion, including the two funds, which have close to $450 million in assets between them. According to Colliver and Bourassa, that success is the result of Stonebridge’s 21-member team and the solid relationships the company has formed with clients. “The quality of our people, from analysts to senior management, is top notch,” Colliver says. “And they all know the institutions we work with quite well and nurture our relationships with them,” adds Bourassa.

Then there’s the relationship between Colliver and Bourassa themselves. The partners have known each other more than 25 years, and as with any relationship, have had highs and lows. But the bottom line, says Bourassa, is that they think alike but also complement each other with their different strengths and weaknesses. “We have separate functions in the business, and when one of us makes a decision, the other respects it,” Bourassa says.

“Communication is the key,” adds Colliver, “and we talk to each other a lot.”