NAV and Investment Update

RNS Number : 1657C

Sequoia Economic Infra Inc Fd Ld

14 June 2019

 

14 June 2019

Sequoia Economic Infrastructure Income Fund Limited

("SEQI" or the "Company")

Net Asset Value as at 31 May 2019 and Investment Update

The NAV for SEQI, the specialist investor in economic infrastructure debt, increased to 103.04p from the prior month's NAV of 102.62p per share. The changes in NAV arose primarily through:

·      Interest income net of expenses of 0.75p;

·      A decrease of 0.21p in asset valuations; and

·      Unhedged FX losses of 0.12p.

As at 31 May 2019, the Company had cash of £46.9m and outstanding drawings on its Revolving Credit Facility of £175.4m, resulting in net leverage of £128.5m. The Company also had undrawn commitments and three additional investments in settlement, collectively valued at £136.3m. On 14 May 2019, the Company announced the successful close of an additional £50m accordion tranche of its Revolving Credit Facility, increasing the maximum facility amount to £200m.

The Company's invested portfolio comprised 51 private debt investments and 21 infrastructure bonds across 8 sectors and 26 sub-sectors and had an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 8.4% and a weighted average life of approximately 4.2 years. Private debt investments represented 84.0% 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 94.9% of par. Investments which are pre-operational represented 16.9% of total assets.

The Company's invested portfolio remains geographically diverse with 46% located across the US, 18% in the UK, 28% in Europe, and 9% 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.

Approximately 96% 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.

The Company's settled investment activities during May include:

·      A NOK 218.0m primary purchase of Exmar's variable rate bonds maturing in 2022, backed by LNG and LPG vessels;

·      An additional €10.2m secondary bond purchase of ferry operator Naviera Armas SA's variable rate 2023 bonds;

·      A final $2.6m disbursement to Whittle Schools in Washington D.C.;

·      An initial $2.9m disbursement to Bourzou Equity LLC, a company created for the construction of a data center in Virginia;

·      An additional $1.7m secondary loan acquisition of Midcoast Energy's TL B; and

·      An additional £1.3m secondary loan acquisition of Elysium Healthcare's TL B, a leading behavioural health services provider in the UK.

The Company also sold its position in Talen Energy's 6.5% 2024 bonds in May.

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	58.0	TMT	Undersea cable	10.1
Salt Creek Midstream	USD	Private	Senior	54.6	Utility	Midstream	8.5
Tracy Hills TL 2025	USD	Private	Senior	47.5	Other	Residential infra	10.4
Scandlines Mezzanine 2032	EUR	Private	HoldCo	45.5	Transport	Ferries	6.1
Bannister Senior Secured	GBP	Private	Senior	42.1	Accomm.	Health care	8.0
Adani Abbot HoldCo 2021	AUD	Private	HoldCo	41.2	Transport	Port	9.5
Kaveh Senior Secured TL 2021	USD	Private	Senior	39.6	TMT	Data centers	8.2
Whittle Schools B	USD	Private	Senior	39.4	Other	Private schools	11.1
Bizkaia TL 2021	EUR	Private	HoldCo	36.4	Power	Electricity gen.	7.7
Aquaventure	USD	Private	Senior	35.6	Utility	Water	8.1
Bulb Senior TL 2021	GBP	Private	Senior	35.0	Utility	Electricity supply	7.2
Project Warsaw	EUR	Private	Senior	31.7	Renewables	Solar & wind	5.9
Sunrun Hera 2017-B	USD	Private	Mezz	31.3	Renewables	Solar & wind	8.1
Seaport TL B	USD	Private	Senior	30.6	Transport	Port	8.6
Sacramento Data Centre	USD	Private	Senior	30.1	TMT	Data centers	11.0

Note (1) - excluding accrued interest

Market Summary

A total of 33 project finance transactions closed in May throughout the Company's eligible jurisdictions, worth $20.9bn in aggregate. Notable transactions, outside of the Company's investment activities, during the month include:

·      A €228m financing of the 300MW Talasol solar PV plant in Spain;

·      A zł1.25bn financing for the construction of the 219.5MW Potegowo wind farm in northern Poland; and

·      A CAD 500m financing for the modernisation of the Ottawa district energy system that heats and cools over 80 buildings in Ottawa.

Data released in June showed the US economy growing by 3.1% in Q1 2019, driven primarily by a build-up in inventories. Deteriorating US-China relations and a May jobs figure of 75,000 have both contributed to cautious market sentiment. In the last week of May, the yield curve inverted the most since 2007.

The Eurozone remains vulnerable to a slowdown in global trade due to its reliance on export countries for growth. Positive Eurozone economic indicators include unemployment which has fallen to 7.7% and wage growth which continues to increase across member states.

The UK economy recently contracted due to temporary factors including a decline in car production. It was reported in June that UK GDP fell by 0.4% as output of motor vehicles producers fell 24%. It is expected that the UK economy is likely to experience more subdued growth for the rest of 2019.

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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