Further update on C share issue

RNS Number : 2596Z

Sequoia Economic Infra Inc Fd Ld

16 September 2015

 

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.

16 September 2015

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

Further update on C share issue and publication of circular

C share issue

Further to the announcement by the Company on 1 September, the Board today announces that it intends to proceed with an Open Offer, Placing and Offer for Subscription for a target issue of 200 million new C Shares at an issue price of 100 pence per C Share (the "Issue").

The Board has been pleased with the Company's continued development and level of deployment of funds to date. Since the Company's launch, the Investment Adviser has successfully deployed approximately 74.6 per cent. of the net proceeds raised at IPO, including committed but unsettled trades, into a diverse portfolio of infrastructure debt investments. The portfolio is spread over 23 investments across the UK, Western Europe, Australia and the US. These investments are spread across six sectors and ten sub-sectors (as at 28 August 2015). The Investment Adviser has been able to deploy proceeds slightly ahead of the IPO deployment target and, encouragingly, continues to see a growing and attractive pipeline of investment opportunities. Since the IPO, the Company has paid its first dividend of 1 pence per Ordinary Share for the quarter ended 30 June 2015 and is confident of meeting its dividend target of five per cent. in its first year and six per cent. thereafter. The unaudited NAV of the Company is 95.96 pence as at 28 August 2015 (excluding the dividend of 1 pence paid in August 2015).

The Board values the support provided to it from its existing Shareholders and as such it intends to implement a material element of pre-emption into the equity issue. Under the terms of the Open Offer, up to approximately 125 million C Shares will be made available to existing Qualifying Shareholders on the basis of five C Shares for every six Ordinary Shares held. 

The Directors may, at their discretion, issue up to a maximum number of 250 million C Shares pursuant to the Issue if the Directors, in consultation with the Investment Adviser and Stifel, believe that appropriate opportunities exist for the deployment of additional Issue proceeds in accordance with the Company's investment objectives and policy. The minimum size of the gross proceeds for the Issue to proceed is £75 million. The costs of the Issue borne by the Company are not expected to exceed two per cent. of the Gross Issue Proceeds. The estimated initial Net Asset Value per share of the C Shares is 98 pence. Further details of the transaction will be announced in the Prospectus expected to be published early in October and the Board expects the Issue to close around the end of October 2015, with the Open Offer expected to close a few days earlier. The Investment Adviser is confident that the proceeds of the Issue can be deployed within nine months of Admission.

Benefits of the Issue

The Board believes that the Issue will have the following benefits:

A.     provide the Company with additional capital to take advantage of the currently available pipeline opportunities which should enable the Company to further diversify its existing portfolio;

B.    spread the Company's fixed running costs across a wider base of shareholders, thereby reducing the Company's ongoing charges and allowing the potential for better returns to investors;

C.    a greater number of Shares in issue and a wider base of shareholders is likely to improve liquidity in the market;

D.    increase the size of the Company which should help make the Company more attractive to a wider base of investors;

E.    the issue of further equity in the form of C Shares is designed to overcome the potential disadvantages for existing Shareholders which could arise out of a conventional fixed price issue of further Shares for cash; and

F.     the availability of a pre-emptive Open Offer in respect of £125 million of the Issue recognises the support provided by existing Shareholders, while the availability in addition of C Shares to new investors under the Placing and Offer for Subscription, offers the prospect of a more diversified shareholder base, and an increased opportunity to grow the Company with the benefts of scale and liquidity mentioned above for existing Shareholders.

Publication of circular

The Company has today published a circular to seek shareholder approval in connection with certain matters relating to the proposed Issue.  An EGM of the Company is being convened at which Shareholders will be asked to: 1) approve a potential related party transaction, that may arise with respect to a related party that may wish to participate in the Placing and/or Offer for Subscription; and 2) grant the Directors the authority to issue and allot, and approve the disapplication of pre-emption rights in respect of up to 250 million C Shares for the purposes of the Issue and up to an aggregate amount not exceeding 10 per cent. of the Company's entire share capital from time to time in issue.

Approval of a potential related party transaction by Shareholders (Resolution 1)

The approval of a related party transaction by Shareholders is required pursuant to Chapter 11 of the UK Listing Authority's Listing Rules. As a substantial shareholder of the Company, SEB Pensionsforsikring A/S and any of its Associates is considered a related party (the "Related Party") and the Board anticipates that it may potentially wish to subscribe for C Shares. SEB Pensionsforsikring A/S currently holds c.29.9m shares in the Company equivalent to approximately 19.8 per cent. of the shares in issue.

Therefore, the participation by the Related Party in the Placing and/or Offer for Subscription will be treated as a related party transaction (the "Related Party Transaction") and will require the approval of independent Shareholders because they are likely to breach, in terms of size, certain specified percentage ratios under the Listing Rules.

Although the Related Party has not yet agreed to particpate in the Issue, it is proposed that the Related Party will be able to subscribe for C Shares issued pursuant to the Placing and/or Offer for Subscription, provided that their shareholding in the Company, in aggregate with any shareholding in the Company of any concert parties (as defined in the City Code on Takeovers and Mergers), following their individual participation in the Issue represents no more than 29.99 per cent. of the issued share capital of the Company following Admission. Should the Related Party choose to participate in the Placing and/or Offer for Subscription, its participation will be on the same terms as other subscribers (i.e. it shall pay £1.00 per C Share for which it subscribes). The participation by the Related Party in the Placing and/or Offer for Subscription may dilute the percentage holding of an existing Shareholder to the extent that the existing Shareholder does not participate in the Issue. In the event that applications under the Placing and/or Offer for Subscription cannot be satisfied in full, applications from the Related Party will be scaled back on the same methodology as are applicable to other Shareholders in each of the Placing and the Offer for Subscription.

The Directors believe that the approval of the Related Party Transaction is beneficial to the overall Issue.

Disapplication of pre-emption rights by Shareholders (Resolution 2)

The Articles contain pre-emption rights in respect of the allotment or sale for cash of "equity securities" (which include Ordinary Shares or C Shares or rights to subscribe for or to convert securities into Ordinary Shares or C Shares), which can be disapplied by way of a special resolution.  It is proposed that the pre-emption rights are disapplied in accordance with the Articles in respect of up to 250 million C Shares to be issued pursuant to the Issue (of which up to a maximum of 500,000 C Shares will be reserved to be issued to the Investment Adviser prior to Conversion, in reinvestment of part of its management fee in C Shares in accordance with the Investment Advisory Agreement).

Notwithstanding the disapplication of pre-emption rights, the Directors recognise the importance of existing Shareholders' protections and consequently the Issue is being structured to include a material element of pre-emption via the Open Offer on the basis of five C Shares for every six Ordinary Shares. Under the terms of the Open Offer, up to approximately 125 million C Shares will be made available to existing Qualifying Shareholders on the basis of five C Shares for every six Ordinary Shares held.

Whilst the Directors do not currently intend to issue shares other than pursuant to the Issue of C Shares and the arrangements referred to in the Circular, the Company also wishes to renew the existing pre-emption disapplication authority in respect of Ordinary Shares. This disapplication may be applied in respect of the issue of Ordinary Shares to the Investment Adviser in respect of the reinvestment of part of its fee in accordance with the Investment Advisory Agreement.  The Company also wishes to maintain an appropriate level of flexibility in order to take advantage of potential future investment opportunities through the issue of Ordinary Shares.  To the extent that a Shareholder does not participate in any such issue of Ordinary Shares, their existing shareholding may be diluted. Any investment opportunities consequentially undertaken will be in accordance with the Company's investment policy when considered to be in the best interests of the Shareholders.

Shareholder resolutions

In order for the Issue to proceed, the Resolutions require the approval of Shareholders at the EGM.  In order to be passed, the Resolutions to be proposed at the EGM will require:

1.     in the case of Resolution 1, which is to be proposed as an ordinary resolution, the approval of Shareholders representing more than 50 per cent. of the votes cast at the EGM; and

2.     in the case of Resolution 2, which is to be proposed as a special resolution, the approval of Shareholders representing at least 75 per cent. of the votes cast at the EGM.

Expected EGM timetable

Latest time and date for receipt of forms of proxy                                   10 a.m. on 1 October 2015

General Meeting                                                                                            10 a.m. on 5 October 2015

A copy of the Circular has been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.morningstar.co.uk/uk/nsm.  A copy of the Circular is also available 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 meanings set out in the Company's Circular dated 16 September 2015.

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, Ireland 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 the United States, and may not be offered or sold in the United States or to, or for the account or benefit of, any U.S. Person. 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 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, Ireland or Japan or to, or for the account or benefit of, any national, resident or citizen of Canada, Japan, Ireland or South Africa. There will be no offer of the ordinary shares in the United States, Canada, South Africa, Japan or Ireland.

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 FSMA, ("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.

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.

 

END

 

 

MSCEAANKFDLSEFF