NAV and Investment Update

RNS Number : 9119I

Sequoia Economic Infra Inc Fd Ld

14 August 2019

 

14 August 2019

Sequoia Economic Infrastructure Income Fund Limited

("SEQI" or the "Company")

Net Asset Value as at 31 July 2019 and Investment Update

The NAV for SEQI, the specialist investor in economic infrastructure debt, increased to 104.03p from the prior month's NAV of 102.66p per share (being the 28 June cum-income NAV of 104.22 less the dividend of 1.5625 pence per share declared in respect of the quarter ended 28 June 2019). The changes in NAV arose primarily through:

·      Interest income net of expenses of 0.52p;

·      An increase of 0.59p in asset valuations; and

·      Unhedged FX gains of 0.26p.

As at 31 July 2019, the Company had cash of £100.9m and outstanding drawings on its Revolving Credit Facility of £101.6m. The Company also had undrawn commitments, and four additional investments in settlement, collectively valued at £135.9m.

The Company's invested portfolio comprised 59 private debt investments and 16 infrastructure bonds across 8 sectors and 28 sub-sectors and had an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 8.2% and a weighted average life of approximately 4.4 years. Private debt investments represented 88.3% of the total portfolio and 70.5% of the portfolio comprised floating rate assets. The weighted average purchase price of the Company's investments was 95.2% of par. Investments which are pre-operational represented 16.4% of total assets.

The Company's invested portfolio remains geographically diverse with 45% located across the US, 16% in the UK, 31% in Europe, and 8% in Australia/New Zealand. Currently the Company is not investing in Portugal or Italy but has selectively invested in opportunities in Spain. The Company's pipeline of economic infrastructure debt investments remains strong and is diversified by sector, sub-sector, and jurisdiction.

At month end, approximately 99% of the Company's NAV consisted of either Sterling assets or was hedged into Sterling. The Company has adequate resources to cover the cash costs associated with its hedging activities. During July, the actual hedge ratio fell below the Company's target hedge ratio while it was securing a new FX trading line (which is now in place). This resulted in a modest FX gain during the month.

The Company's settled investment activities during July include:

·      A €31.7m secondary loan acquisition of Aliwin Plus SL, a portfolio of operational solar PV plants in the Cáceres region of Spain;

·      A $30m secondary loan to Flight Senior Secured, a company that operates in the e-vehicle space, predominantly based in the US but with customers around the globe;

·      A $25m primary senior secured loan to Great River Hydro, a company that operates a portfolio of hydro-powered electricity generation assets across New England in the US;

·      An additional $809k disbursement to Bourzou Equity LLC, a company created for the construction of a data centre in Virginia; and

·      An additional €155k disbursement to Hatch Student Housing in Cork, Ireland.

The following investments were sold or called/repaid in July:

·      $43.0m of GenOn Energy's variable rate 2039 bonds backed by a portfolio of power generation assets in the US; and

·      £3.0m of Heathrow Airport's 3.875% 2027 bonds.

Ordinary Portfolio Summary (15 largest settled investments)

Investment name	Currency	Type	Ranking	Value £m(1)	Sector	Sub-sector	Yield to maturity / worst (%)
Hawaiki Mezzanine Loan	USD	Private	Mezz	60.8	TMT	Undersea cable	11.6
Salt Creek Midstream	USD	Private	Senior	56.5	Utility	Midstream	8.3
Tracy Hills TL 2025	USD	Private	Senior	49.1	Other	Residential infra	10.4
Scandlines Mezzanine 2032	EUR	Private	HoldCo	47.6	Transport	Ferries	5.8
Euroports 2nd Lien 2026	EUR	Private	Mezz	45.4	Transport	Port	7.8
Adani Abbot HoldCo 2021	AUD	Private	HoldCo	42.3	Transport	Port	8.8
Bannister Senior Secured	GBP	Private	Senior	42.1	Accomm.	Health care	8.0
Kaveh Senior Secured TL 2021	USD	Private	Senior	40.9	TMT	Data centers	7.8
Whittle Schools B	USD	Private	Senior	40.7	Other	Private schools	11.1
Bizkaia TL 2021	EUR	Private	HoldCo	38.9	Power	Elec. generation	7.7
Aquaventure	USD	Private	Senior	36.8	Utility	Water	8.1
Bulb Senior TL 2021	GBP	Private	Senior	35.0	Utility	Electricity supply	7.2
Project Warsaw	EUR	Private	Senior	32.7	Renewables	Solar & wind	5.8
Sunrun Hera 2017-B	USD	Private	Mezz	32.3	Renewables	Solar & wind	7.8
Seaport TL B	USD	Private	Senior	31.9	Transport	Port	8.2

Note (1) - excluding accrued interest

Market Summary

A total of 73 project finance transactions closed in July throughout the Company's eligible jurisdictions, worth $12.7bn in aggregate. Notable transactions outside of the Company's investment activities during the month include:

·      A €281.64m financing of the 391MW Nunez de Balboa solar PV plant in Spain;

·      A €236m financing of the rolling stock and operation of the Charles de Gaulle Express project in Paris; and

·      A £1.96bn refinancing of the Beatrice offshore wind farm in north-eastern Scotland.

The US July jobs report was positive, with 164,000 jobs added, keeping the unemployment rate at 3.7%. As expected, the US Federal Reserve cut interest rates by 0.25%. In announcing the rate cuts, the Fed chairman cited weak global growth and the impact of the trade war with China.

Overall eurozone economic growth was 0.2% in Q2, with an estimated inflation rate of just 1.1%. Germany's economy contracted in Q1 and is believed to have also contracted in Q2, signalling that the Eurozone's biggest economy may be entering a recession. The ECB is believed to be considering another round of rate cuts and bond purchases in response to weak economic data.

The UK economy is continuing to struggle amid Brexit uncertainty and the global slowdown. Business investment fell in Q2, with an overall 0.2% contraction in the economy, the first contraction since 2012.

The Company's monthly investor report and additional portfolio disclosure will be made available at http://www.seqifund.com/.

LEI: 2138006OW12FQHJ6PX91

For further information please contact:

Sequoia Investment Management Company                            [phone]

Steve Cook

Dolf Kohnhorst

Randall Sandstrom

Greg Taylor

Stifel Nicolaus Europe Limited                                                  [phone]

Neil Winward

Mark Bloomfield

Gaudi Le Roux

Tulchan Communications (Financial PR)                                 [phone]

James Macey White

Martin Pengelley

Elizabeth Snow   

Praxis Fund Services Limited (Company Secretary)              [phone]

Matt Falla                                                                                              

About Sequoia Economic Infrastructure Income Fund Limited

The Company seeks to provide investors with regular, sustained, long-term distributions and capital appreciation from a diversified portfolio of senior and subordinated economic infrastructure debt investments. The Company is advised by Sequoia Investment Management Company Limited.

 

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