C Share Issue, Placing Programme and NAV update

RNS Number : 4273X

Sequoia Economic Infra Inc Fd Ld

06 May 2016

 

THIS ANNOUNCEMENT IS NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES (INCLUDING TO U.S. PERSONS, AS SUCH TERM IS DEFINED UNDER REGULATION S OF THE US SECURITIES ACT OF 1933, AS AMENDED, THE "SECURITIES ACT"), CANADA, AUSTRALIA, NEW ZEALAND, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

6 May 2016

Sequoia Economic Infrastructure Income Fund Limited (the "Company")

C Share Issue, Placing Programme and NAV update

Further to the announcement on 14 April 2016 and in light of the continued attractive investment environment and a growing number of opportunities in the economic infrastructure debt market, the Board of Directors has today resolved to proceed with a partially pre-emptive issue of C Shares seeking to raise £150 million. In addition to this, the Board has resolved to implement a Placing Programme of Ordinary Shares which will become effective after Conversion of the C Shares into Ordinary Shares. 

The Investment Adviser continues to see significant opportunities in the infrastructure debt market. The Board believes that it would be in the interests of the Company to raise further funds through a C share issuance to take advantage of these opportunities. Specifically, the Board believes that the current opportunities available to the Investment Adviser will enable it to further diversify its existing portfolio and spread the fixed costs of running the Company across a wider base. The addition of the Placing Programme would enable the Company the flexibility to issue shares on a basis accretive to NAV and to take advantage of investment opportunities after Conversion of the C Shares.

NAV update

In relation to the C Share Issue and Placing Programme, the Board is pleased to announce that the latest unaudited NAV of the Company, as at 13 April 2016, is 99.16 pence per share. This includes a dividend of 1.5 pence per Ordinary share declared (but not yet paid) on 20 April 2016. Adjusted for the dividend payment, the Company's unaudited NAV per share on 13 April 2016 would have been 97.66 pence. 

The C Share Issue (the "Issue")

The Issue is being implemented by way of an Open Offer, Placing and Offer for Subscription of C Shares. The target size of the Issue is £150 million before expenses. The Directors recognise the importance of pre-emption rights to Ordinary Shareholders. Accordingly, a substantial proportion of the C Shares (being 121,069,686 C Shares) is being initially offered to Qualifying Shareholders by way of an Open Offer pursuant to which they will be entitled to apply for 2 C Shares for every 5 Ordinary Shares held on the Record Date. The balance of the C Shares, together with any C Shares not allocated to Qualifying Shareholders under the Open Offer (including under an Excess Application Facility), will be made available, at the discretion of the Directors, under the Placing and/or Offer for Subscription. On Admission of the C Shares to the Standard Segment of the Official List, the Net Asset Value per C Share will be approximately, and not less than, 98 pence per C Share.

A C share structure will allow the proceeds from the issue of C Shares to be accounted for and managed in a separate pool of capital of the Company which will convert into Ordinary Shares once deployed as specified further below. By accounting for and managing these assets separately, holders of existing Ordinary Shares will not be exposed to a portfolio containing a substantial amount of uninvested cash as the C Shares will not convert into Ordinary Shares before the Calculation Time. The Company expects to shortly be publishing a prospectus (the "Prospectus") in connection with the Issue.

The Company will invest the Net Issue Proceeds in accordance with the Company's investment policy and will seek to acquire target investments as similar as possible to those to be described in the Target Portfolio to be outlined in the Prospectus. However, there can be no assurance that any of these investments will remain available for purchase after the Issue or, if available, at what price the investments can be acquired. The acquired portfolio, therefore, may be substantially different from the Target Portfolio.

It is estimated that 50 per cent. of the Net Issue Proceeds will be invested within three months, 75 per cent. of the Net Issue Proceeds will be invested within six months and that the full amount of the Net Issue Proceeds will be fully invested within nine months after Initial Admission.

Benefits of the C Share Issue

The Investment Adviser continues to see significant opportunities in the infrastructure debt market.  The Board believes that it would be in the interests of the Company to raise further funds through a share issuance to take advantage of these opportunities.  Specifically, the Board believes that the current opportunities available to the Investment Adviser will enable it to diversify further its existing portfolio and spread the fixed costs of running the Company across a wider base, thereby reducing the ongoing costs of the Company on a per share basis. The Directors further believe that growing the size of the Company would increase secondary market liquidity for investors and make the Company more attractive to a wider investor base.

The C Share Issue structure

The C Share Issue comprises an Open Offer, Placing and Offer for Subscription of C Shares. These C Shares will be issued at the Issue Price of 100 pence per share and will convert into Ordinary Shares at the point where 85 per cent. of the Net Issue Proceeds are determined to have been invested or committed to be invested in accordance with the Company's investment policy. If less than 85 per cent. of the Net Issue Proceeds have been invested by the first anniversary of Admission of the C Shares, the C Shares will convert into Ordinary Shares at this point.

The Board recognises the importance of avoiding material cash drag to holders of Ordinary Shares and therefore, in the event that Conversion occurs on the first anniversary of Admission when less than 85 per cent. of the Net Issue Proceeds have been invested, the Directors will, at their sole discretion, consider returning to C Shareholders (prior to such a Conversion) any uninvested Net Issue Proceeds. For the avoidance of doubt, any unsettled trades or orders will be considered 'invested' proceeds and any return to C Shareholders will exclude cash required for the Company's working capital purposes.

The new Ordinary Shares arising on Conversion will rank pari passu with the Ordinary Shares then in issue for dividends and other distributions and will be listed on the premium segment of the Official List. Full details of the C Shares and Conversion will be set out in the Prospectus.

The investments made by the Company with the Net Issue Proceeds will be accounted for and managed as a distinct pool of assets by the Company until the Calculation Time for Conversion. The Conversion Ratio will then be calculated and, pursuant to Conversion, the C Shares in issue will convert into a number of Ordinary Shares calculated by reference to the relative Net Asset Values per share of the C Shares and the Ordinary Shares.

The Company intends to pay dividends in relation to the C Shares on a quarterly basis from the assets attributable to the C Shares, with the first such dividend expected to be paid for the period ending 30 September 2016. The Company currently intends to target an ongoing dividend for holders of C Shares equivalent to five per cent. per annum until Conversion Time (by reference to the Issue Price and paid on the basis of 1 per cent. for the first and second quarter dividend and 1.5 per cent. for the third and fourth quarter dividend). To the extent that Conversion occurs prior to a dividend payment, the value of that dividend payment will be reflected in the C Share NAV and accordingly in the Conversion Ratio.

The target number of C Shares to be issued pursuant to the Issue is 150 million but the Company may issue up to a maximum number of 200 million C Shares pursuant to the Issue.

The Placing Programme

In addition to the C Share Issue, the Directors have resolved to implement a Placing Programme for up to 120 million shares which will become effective after Conversion of the C Shares. The Placing Programme is being created to enable the Company to raise further capital as new investment opportunities arise after the C Share proceeds have been deployed.

The Directors believe that the Placing Programme will create the potential to enhance the NAV per Ordinary Share of existing Ordinary Shares through new share issuance at a premium to NAV per Ordinary Share, after the related costs have been deducted. Additional benefits of the Placing Programme include the ability to further grow the Company thereby spreading operating costs over a larger capital base as well as improving the liquidity of the Ordinary Shares.

The Company will invest the Net Placing Programme Proceeds in accordance with the Investment Policy. It is the Directors' intention that no Placing Programme Shares will be issued prior to the Conversion of the C Shares issued pursuant to the Issue.

Extraordinary General Meeting

The proposals in the Prospectus are conditional on, amongst other things, the approval of the Resolutions by the Shareholders at the EGM. A separate Circular will be published shortly after publication of the Prospectus containing further details of the Resolutions.

Expected Timetable - C Share Issue and Placing Programme

Record Date for entitlements to participate in the Open Offer	5.00 p.m. on 5 May 2016
Ex-entitlement date for the Open Offer	8.00 a.m. on 6 May 2016
Open Offer opens	8.00 a.m. on 6 May 2016
Basic Entitlements and Excess CREST Open Offer Entitlements credited to CREST stock accounts of Existing CREST	As soon as practicable after 8.00 a.m. on 9 May 2016
Recommended latest time for requesting withdrawal of Basic Entitlements and Excess CREST Open Offer Entitlements from CREST	4.30 p.m. on 27 May 2016
Latest time and date for depositing Basic Entitlements and Excess CREST Open Offer Entitlements into CREST	3.00 p.m. on 31 May 2016
Latest time and date for splitting Open Offer Application Forms (to satisfy bona fide market claims only)	3.00 p.m. on 2 June 2016
Latest time and date for receipt of completed Open Offer Application Forms and payment in full under the Open Offer or settlement of relevant CREST instructions (as appropriate)	11.00 a.m. on 6 June 2016
C Share Placing and Offer for Subscription
C Share Placing and Offer for Subscription open		8.00 a.m. on 6 May 2016
Latest time and date for receipt of completed Offer for Subscription Application Forms and payment in full under the Offer for Subscription		3.00 p.m. on 6 June 2016
Latest time and date for receipt of placing commitments under the C Share Placing		12.00 p.m. on 7 June 2016
Other key dates
Results of the Open Offer, C Share Placing and Offer for Subscription announced		8 June 2016
Initial Admission of the C Shares to the Official List and commencement of dealings on the London Stock Exchange		8.00 a.m. on 10 June 2016
CREST accounts credited in respect of C Shares to be held in uncertificated form		On or around 10 June 2016
Dispatch of definitive share certificates in respect of C Shares (where applicable)		On or around 14 June 2016
Placing Programme opens		6 May 20161
Last date for Placing Programme Shares to be issued pursuant to the Placing Programme		5 May 2017
EGM meeting dates2
Latest time and date for receipt of Forms of Proxy		10.00 a.m. on 23 May 2016
EGM		10.00 a.m. on 25 May 2016

Note:

1.     It is the Directors' intention that no Placing Programme Shares will be issued prior to the Conversion of the C Shares issued pursuant to the Issue.

2.     A separate Circular will be published following publication of the Prospectus containing details of the Resolutions for which the Board are seeking Shareholder approval.

The dates and times specified above are subject to change. In particular, the Directors may (with the prior approval of Stifel) bring forward or postpone the closing time and date for the C Share Issue and the Placing Programme. In the event that a date or time is changed, the Company will notify persons who have applied for C Shares of changes to the timetable by the publication of a notice through a Regulatory Information Service. References to times are to London times unless otherwise stated.

Admission to trading

Applications will be made for the C Shares to be admitted to the standard segment of the Official List and to trading on the London Stock Exchange's Main Market for listed securities. It is expected that admission will become effective, and that dealings in the C Shares will commence on or around 10 June 2016.

Further details

The ticker for the C Shares is SEQC. The ISIN for the C Shares is GG00BYTNQV04 and the SEDOL is BYTNQV0.  The ISIN of the Basic Entitlements is GG00BYTNQR67 and the SEDOL is BYTNQR6. The ISIN of the Excess CREST Open Offer Entitlement is GG00BYTNQT81 and the SEDOL is BYTNQT8.

Stifel Nicolaus Europe Limited is acting as sole sponsor, financial adviser and bookrunner to the Company.

A copy of the Prospectus, when published, will be submitted to the National Storage Mechanism and will shortly thereafter be available for inspection at: www.morningstar.co.uk/uk/nsm as well as on the Company's website at http://www.seqifund.com/downloads.

Defined terms used in this announcement shall (unless the context otherwise requires) have the same meaning as set out in the Prospectus.

For further information please contact:

Sequoia Investment Management Company Steve Cook Dolf Kohnhorst Randall Sandstrom Greg Taylor	[phone]
Stifel Nicolaus Europe Limited Neil Winward Mark Bloomfield Gaudi Le Roux	[phone]
Praxis Fund Services Limited (Company Secretary) Shona Darling	[phone]

About the Company

Sequoia Economic Infrastructure Income Fund Limited is a Guernsey-incorporated closed-ended investment company whose Ordinary Shares are traded on the main market of the London Stock Exchange. The Company's investment strategy is to provide shareholders with long-term distributions by owning debt exposures to economic infrastructure projects across a diversified range of jurisdictions, sectors and sub-sectors. The total net annual return target of the Company is seven to eight per cent. (by reference to the IPO price of £1 per Ordinary Share). The Company's Ordinary Shares were admitted to trading on the main market of the London Stock Exchange on 3 March 2015, following a successful, oversubscribed IPO.

IMPORTANT NOTICES

Neither this announcement nor the information contained herein is for release, publication or distribution, directly or indirectly, in or into the United States, South Africa, Canada, Australia, New Zealand or Japan or any other jurisdiction where to do so might constitute a violation of the relevant laws or regulations of such jurisdiction. The securities referred to herein have not been and will not be registered under the relevant securities laws of any such excluded territory.

This announcement does not contain, constitute or form part of an offer for sale of, resale of, transfer of or delivery of or the solicitation of an offer to purchase directly or indirectly, securities in the United States or to, or for the account or benefit of a  U.S. Person (as defined in Regulation S of the Securities Act). The securities referred to herein have not been, and will not, be registered under the Securities Act or any other applicable securities laws of, or with any securities regulatory authority of, any state or other jurisdiction of the United States, and may not be offered, sold, resold, transferred or delivered, directly or indirectly, in the United States or to, or for the account or benefit of, any U.S. Person absent registration or an applicable exemption from the registration requirements of the Securities Act.  Although the issuer does not intend to register any part of the proposed offering in the United States, any public offering in the United States would be made by means of a prospectus that could be obtained from the issuer and would contain detailed information about the company and management, as well as financial statements. The Company has not been and will not be registered under the U.S. Investment Company Act of 1940, as amended, and neither the Investment Manager nor the Investment Adviser will be registered as an investment adviser under the U.S. Investment Advisers Act of 1940, as amended.  Consequently, investors will not be entitled to the benefits and protections of the U.S. Investment Company Act of 1940, as amended or the U.S. Investment Advisers Act of 1940, as amended.  The shares of the Company will be offered and sold only to non-US persons outside the United States in reliance on Regulation S under the Securities Act.  There will be no offer of the Company's securities in the United States.  The distribution of this document may also be restricted by law in other jurisdictions.

This announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase or subscribe for any C Shares, Ordinary Shares or any other securities nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract.

The distribution of this announcement may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

Subject to certain exceptions, the securities referred to herein may not be offered or sold in South Africa, Canada, Australia, New Zealand or Japan or to, or for the account or benefit of, any national, resident or citizen of Canada, Japan, Australia, New Zealand or South Africa. There will be no offer of the C Shares or Ordinary Shares in the United States, Canada, South Africa, Japan, Australia or New Zealand.

In member states of the European Economic Area (the "EEA"), this announcement is directed only at (a) persons who are "qualified investors" as defined in section 86(7) of the Financial Services and Markets Act 2000 ("Qualified Investors") being persons falling within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC) (as amended, including by Directive 2010/73/EU, to the extent such amendments have been implemented in the relevant Member State and including any relevant implementing measure in the relevant Member State); (b) in the United Kingdom, Qualified Investors who are persons who (i) fall within article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"); (ii) fall within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations, etc") of the Order; or (iii) are persons to whom it may otherwise be lawfully communicated (all such persons together being referred to as "Relevant Persons").  This announcement must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this announcement relates is available only to Relevant Persons and will be engaged in only with relevant persons. 

Stifel Nicolaus Europe Limited ("Stifel"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for the Company and no-one else in connection with the potential equity issue. Stifel will not regard any other person as its client in relation to the potential issue and will not be responsible to anyone other than the Company for providing the protections afforded to its clients, nor for providing advice in relation to the potential issue, the contents of this announcement or any transaction, arrangement or other matter referred to herein.

Neither Stifel nor any of its directors, officers, employees, advisers, affiliates or agents accepts any responsibility or liability whatsoever for/or makes any representation or warranty, express or implied, as to the truth, accuracy or completeness of the information in this announcement (or whether any information has been omitted from the announcement) or any other information relating to the Company or its subsidiary, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of the announcement or its contents or otherwise arising in connection therewith.

The Company has been established in Guernsey and has been registered as a registered closed-ended collective investment scheme under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended. It is suitable only for professional or experienced investors, or those who have taken appropriate professional advice.

Regulatory requirements which may be deemed necessary for the protection of retail or inexperienced investors, do not apply to listed funds. By investing in the Company you will be deemed to be acknowledging that you are a professional or experienced investor, or have taken appropriate professional advice, and accept the reduced requirements accordingly.

You are wholly responsible for ensuring that all aspects of the Company are acceptable to you. Investment in listed funds may involve special risks that could lead to a loss of all or a substantial portion of such investment. Unless you fully understand and accept the nature of the Company and the potential risks inherent in it you should not invest in the Company.

Further information in relation to the regulatory treatment of listed funds domiciled in Guernsey may be found on the website of the Guernsey Financial Services Commission at http://www.gfsc.gg/The-Commission/Pages/Home.aspx.

 

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