CDPQ to Finance Expansion of Everstream's Business-Only Fiber Network
Everstream has raised the bar for business connectivity, delivering a business-only fiber network with the speed, reliability, scale and performance that today’s enterprises demand. With more than 27,000 route miles of fiber and speeds up to 100 Gbps, Everstream’s enterprise-grade network delivers robust business fiber services, including internet, WAN, data center connectivity and dark fiber. Through its “Do What You Say You Will Do” approach, Everstream is a valued partner dedicated to the success of business customers. For more information, visit everstream.net.
At Caisse de dépôt et placement du Québec (CDPQ), we invest constructively to generate sustainable returns over the long term. As a global investment group managing funds for public retirement and insurance plans, we work alongside our partners to build enterprises that drive performance and progress. We are active in the major financial markets, private equity, infrastructure, real estate and private debt. As at December 31, 2021, CDPQ’s net assets totalled CAD 419.8 billion. For more information, visit cdpq.com, follow us on Twitter or consult our Facebook or LinkedIn pages.
This is an interesting deal and I will discuss why below.
I suggest you read the CDPQ's 2021 Annual Report which is available here.
In Fixed Income, I note this in the highlights:
In a rising rate environment where inflation is rampant, there's not a lot of places you can hide.
Still, CDPQ's Fixed Income group anticipated rising rates and strategically positioned the portfolio (shorten duration) to deal with rising rates. This allowed them to beat their benchmark even though they were marginally down (-0.6% vs -1.2% for the benchmark).
The other reason why I bring this up is note "good performance in private credit".
In a rising rate environment, one of the things fixed income departments at large pensions can do is more direct lending. In the private credit space, debt is generally issued with floating rate payments.
Here, I will refer you to a comment Blackstone put out last year which they updated on private credit investing in a rising rates environment. I note this:
What has made private credit more resilient in rising rate environments and therefore, we believe, an attractive consideration for investors today?
Floating Rate Loans. As we enter a new interest rate cycle characterized by higher inflation, fixed income investors may struggle to earn satisfactory yield on their long-duration investments. In a rising rate environment, we believe floating rate loans are highly attractive, as income can rise alongside interest rate increases. Private credit tends to be floating rate, which may limit both the rate risk and the duration risk that are inherent in traditional fixed income today.
Privately Negotiated Deals. Private credit transactions are bilateral in nature and are negotiated directly between the lender and the borrower, which is typically backed by a private equity sponsor. With private credit, investors can access a wide funnel of private transactions. Managers aim to invest in the best ones. Private credit managers generally aim to negotiate better protections, including a senior secured structure, covenant terms, call protection, each of which can make these credits more defensive.
Less Volatility. Less volatility is expected in private assets because these assets are not traded in public markets. Valuations are generally based on the fundamentals of the underlying companies. Managers generally are not forced to mark private assets to market during periods of volatility. Private loans have offered relatively low historical volatility, while still maintaining attractive returns, when compared with the public market.
Credit quality improves with the economic recovery. Credit quality and fundamentals of issuers generally improve with economic recoveries, and today the performance of the US economy continues to be resilient in spite of inflation and related headwinds. In any economic environment, we think it is critical for investors to select private credit managers who carry out extensive due diligence, oversight of credit quality, and focus on downside protection.
These are the main advantages of private credit. There are risks but there are plenty of advantages too.
Now, back in April, Everstream put out a press release stating it secured over $1 billion for refinancing and debt capital arrangement:
Everstream, the business-only fiber network, has announced it has secured more than $1 billion in debt financing to refinance existing credit facilities and raise additional capital to continue funding network growth and densification across its 10-state footprint. The deal marks the first time a U.S. based telecommunications company has leveraged an OpCo/HoldCo financing model, driven by demand from Institutional Infrastructure investors.
Everstream, which is majority owned by AMP Capital, is bringing high-capacity fiber connectivity to metro and rural areas across the Midwest and Mid-Atlantic. Consistent with its mission to bring speed, reliability, scale, and performance to its customers, the company increased its total route miles of fiber by 80% in 2021, growing to nearly 27,000 route miles.
“The role of communications infrastructure is increasingly critical, with technologies and services such as fiber and data centers leading the way,” said Sam Sixt, Investment Director at AMP Capital and Board Member of Everstream. “Through its successes to date, Everstream has demonstrated it has both the vision for the next generation of communications and the ability to execute on that vision. We are very pleased that the latest round of financing will support Everstream during its next phase of growth.”
“As data usage continues to skyrocket, a reliable, scalable fiber backbone is critical to delivering next-generation technologies and services to our business customers,” said Everstream CEO Brett Lindsey. “This latest round of financing has demonstrated that our partners have confidence in Everstream’s strategy to grow and densify our best-in-class network across our footprint.”
The debt package includes a senior and junior tranche, which was anchored by a diverse group of lenders:
- Societe Generale as Coordinating and Structuring Bank, Global Coordinating Bookrunner, Joint Lead Arranger and Administrative Agent
- Natixis as Global Coordinating Bookrunner and Joint Lead Arranger
- ING, Santander and SMBC as Joint Bookrunners and Joint Lead Arrangers
- CoBank, Macquarie, RBC, TD Bank, and Vantage Infrastructure as Joint Lead Arrangers
- DigitalBridge Credit, in partnership with a wholly-owned subsidiary of CPP Investments, as lender to the junior tranche
“This innovative financing solution provides Everstream with the flexibility and runway to build critical infrastructure that underpins the demands of its customers,” said Aman Sareen, Director at AMP Capital. “The caliber of institutions, which features a strong cross section of banks and infrastructure investors, speaks to the high-quality nature of the asset and best-in-class management team.”
CDPQ now joins this group of lenders which are all financing Everstream's growth.
Lastly, I suggest you read more about Everstream to really appreciate what this company is doing:
At Everstream, we understand that for business, bandwidth is oxygen. When it’s there and abundant, no one thinks about it. But when it’s gone, getting it back becomes everyone’s only focus. The requirements of business are different – they’re critical.
That’s why Everstream was founded, because we believe business deserves better. It’s why we built the Business-Only Fiber Network.
Everstream serves mid-sized and large enterprise businesses. Our network brings more than 25,000 route miles of fiber and speeds up to 100 Gbps. We bring our customers fiber, speed, scale and expert support.
We disrupt the bureaucratic, big telecom status quo by providing a real relationship dedicated to our customers’ success. Our biggest differentiator is our people. Our “Do What You Say You Will Do” culture empowers our team members to deliver an unrivaled customer experience rooted in passion, transparency and accountability.
- Founded in 2014
- Headquartered in Cleveland, Ohio
- 25,000+ fiber miles
- 46 data centers connected to the network, from Tier 1 to Tier 4
- 3,500+ on-net locations
Why is a business-only network best for your business? It comes down to one thing: focus.
At Everstream, we exclusively serve business customers, delivering a 100% all-fiber network, enterprise-grade solutions, a team of network engineers for design, delivery, and support, and relationships with experts dedicated to your success. In other words, we focus on business…so you can too.
Watch to learn more: (see the video clip here).
Headquartered in Cleveland, Ohio, this company is growing fast and disrupting the traditional big telecom model by really focusing on its customers, mid-sized and large enterprise businesses.
Anyway, this is a great deal for CDPQ and its Fixed Income department which is growing its private credit investments.
You can read more about CDPQ's Fixed Income department and their activities here.
Below, Everstream is a super-regional network service provider bringing fiber-based Ethernet, internet and data center solutions to businesses throughout the Midwest. Watch this older (2018) clip to get acquainted with this company. Great company which is growing fast and CDPQ is now part of the club financing this explosive growth.