NAV and Investment Update

RNS Number : 6751L

Sequoia Economic Infra Inc Fd Ld

17 May 2022

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO THE UNITED STATES

17^th May 2022

Sequoia Economic Infrastructure Income Fund Limited

("SEQI" or the "Company")

NAV update

The NAV for SEQI, the specialist investor in economic infrastructure debt, decreased marginally to 98.75 pence per share from the prior month's NAV of 98.94 pence per share, (being the 31 March 2022 cum ‑ income NAV of 100.50 pence per share less the dividend of 1.5625 pence per share in respect of the quarter ended 31 March 2022), representing a decrease of 0.19 pence per share.

A full attribution of the changes in the NAV per share is as follows:

	pence per share
March NAV	100.50
Interest income, net of expenses	0.61
FX movements, net of hedges Dividends	0.09 -1.56
Decrease in asset valuations	-0.89
April NAV	98.75

Portfolio update

Over the month, yield curves in US Dollars, Sterling and Euros rose materially, with, for example, 10-year Treasuries rising from 2.4% to 2.9% and 10-year Gilts rising from 1.6% to 1.9%. This resulted in the values on many fixed rates loans falling, and explains a substantial part of the fall in the NAV this month. It should be noted that this decline is simply a timing effect as the price of those fixed rate loans will accrete back up to par as they get closer to their maturity dates.

As at 29 April 2022, the Company had cash of £107.7m and had drawn £123.3m on its £325m revolving credit facility. The Company also had undrawn commitments on existing investments collectively valued at £65.5m. The Company's invested portfolio consisted of 65 private debt investments and 8 infrastructure bonds across 8 sectors and 29 sub ‑ sectors. It had an annualised yield ‑ to ‑ maturity (or yield ‑ to ‑ worst in the case of callable bonds) of 8.8% and a cash yield of 6.5%. The weighted average portfolio life is approximately 4.1 years. Private debt investments represented 95% of the total portfolio and 50% of the portfolio comprised floating rate assets. Investments which are pre ‑ operational represented 13% of total assets.

The Company's invested portfolio remains geographically diverse with 51% located across the US, 17% in the UK, 27% in Europe, and 5% 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 100% of the Company's NAV consisted of either Sterling assets or was hedged into Sterling. The Company has adequate resources to cover margin calls on its hedging book.

The Investment Advisor continues to focus on the Company's non-performing loans. While the values on the Company's loans to Bulb Energy, Salt Lake Potash and the school in Washington are more-or-less unchanged over the month, progress is being made on each one:

• Bulb Energy: shortly after the end of the month, the Company received an interim distribution of £10.0 million from the administrators appointed to Simple Energy (the parent of Bulb Energy). This is sufficient to pay all the interest that had accrued on the loan since the borrower entered administration, and also to reduce the loan balance by approximately £7.5m; Bulb's value is now approximately 1.3% of NAV. Further distributions are also expected; and

• Salt Lake Potash: the Investment Advisor continues to work with the Receiver and other parties on the resolution of this investment. Currently, there is a M&A process underway to sell the business, which is expected to be completed over the coming months, at which point a fuller disclosure can be made to investors; and

• Washington school: the Investment Adviser has made substantial progress on putting the capital structure of the borrower on to a more stable, long-term basis and expects the definitive documentation in relation to that to be signed shortly.

The Company's settled investment activities during April include:

• an advance of $1.4m under the Salt Lake Potash Super Senior Facility, an Australian potash facility in Australia. This is a super-senior liquidity facility to a non-performing asset. The purpose of the loan is to finance the company during the restructuring process; and

• an additional $0.2m disbursement to Lanthanum, a leading developer of hyperscale data centres in the USA.

The following assets sold or prepaid in April:

• a loan of $19.1m to Sierra, a HoldCo financing of a portfolio of nine Californian gas turbines;

• an interim distribution of £10.0m from the administrators appointed to Simple Energy (the parent of Bulb Energy), a UK-based energy provider. Bulb's value is now approximately 1.3% of NAV. Further distributions are expected; and

• a full sale of our Talen 2025 and 2026 Bonds for $3.7m and $3.8m respectively thereby avoiding having to participate in the subsequent Chapter 11 Bankruptcy proceedings announced last week.

Ordinary Portfolio Summary (15 largest settled investments)

Investment name	Currency	Type	Ranking	Value £m (1)	Sector	Sub-sector	Cash-on-cash yield (%)	Yield to maturity / worst (%)
Bannister Senior Secured	GBP	Private	Senior	64.7	Accommodation	Health care	7.29	7.57
Hawaiki Mezzanine Loan	USD	Private	Mezz	61.4	TMT	Undersea cable	8.31	8.66
Infinis Energy	GBP	Private	Senior	60.9	Renewables	Landfill gas	5.34	5.86
AP Wireless Junior	EUR	Private	Mezz	59.6	TMT	Telecom towers	6.28	6.34
AP Wireless US Holdco	USD	Private	HoldCo	54.6	TMT	Telecom towers	6.05	6.83
Tracy Hills TL 2025	USD	Private	Senior	54.5	Other	Residential infra	8.76	8.76
Hawkeye Solar HoldCo	USD	Private	HoldCo	54.4	Renewables	Solar & wind	8.75	9.26
Project Camden	EUR	Private	HoldCo	53.6	Power	Base load	7.62	7.88
Brightline	USD	Private	Senior	53.2	Transport	Rail	8.37	8.94
Madrid Metro	EUR	Private	HoldCo	51.9	Transport assets	Rolling stock	1.34	6.09
Expedient Data Centers	USD	Private	Senior	51.7	TMT	Data centers	6.31	6.31
Lightspeed Fibre Group	GBP	Private	Senior	50.1	TMT	Broadband	6.69	6.69
Sacramento Data Centre	USD	Private	Senior	48.4	TMT	Data centers	7.00	7.00
Project Nimble	EUR	Private	HoldCo	44.4	TMT	Data centers	8.35	9.14
Kenai HoldCo 2024	EUR	Private	HoldCo	42.8	Power	Base load	0.00	11.43

Note (1) - excluding accrued interest

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

LEI: 2138006OW12FQHJ6PX91

This announcement is not for publication or distribution, directly or indirectly, in or into the United States of America. This announcement is not an offer of securities for sale into the United States.  The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration.  No public offering of securities is being made in the United States.

For further information please contact:

Sequoia Investment Management Company  [phone]

Steve Cook

Dolf Kohnhorst

Randall Sandstrom

Greg Taylor

Anurag Gupta

Jefferies International Limited  [phone]

Gaudi le Roux

Neil Winward

Tulchan Communications (Financial PR)  [phone]

Martin Pengelley

Elizabeth Snow

Laura Marshall

Sanne Fund Services Guernsey Limited  

(Company Secretary)    [phone]

Matt Falla

Katrina Rowe 

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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