NAV and Investment Update

RNS Number : 4126S

Sequoia Economic Infra Inc Fd Ld

14 July 2022

 

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

14^th July 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 to 98.08 pence per share from the prior month's NAV of 98.39 pence per share, representing a decrease of 0.31 pence per share. A full attribution of the changes in the NAV per share is as follows:

	pence per share
May NAV	98.39
Interest income, net of expenses	1.03
FX movements, net of hedges	0.14
Decrease in asset valuations	-1.48
June NAV	98.08

Portfolio update

As at 11 July 2022, the Company performed a share buyback for 500,000 shares at 88 pence per share. The 2022 annual report is also now available on the Company's website.

The yield to maturity increase is due to credit spreads widening across the whole portfolio, coupled with risk free rate adjustments / lower marks on fixed rate assets. While increases in longer-term interest rates and widening spreads are likely to have the effect of temporarily decreasing NAV, since the values of loans decline (fixed-rate loans being the most affected), they too should eventually be positive for the Company, since reinvestment opportunities will offer higher interest rates, and prices of existing loans will pull to par.

As at 30 June 2022, the Company had cash of £157.9m and had drawn 124.7m on its £325m revolving credit facility. The Company also had undrawn commitments on existing investments collectively valued at £52.7m. The Company's invested portfolio consisted of 62 private debt investments and 8 infrastructure bonds across 8 sectors and 26 sub-sectors. It had an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 9.8% and a cash yield of 6.5%. The weighted average portfolio life is approximately 4.0 years. Private debt investments represented 95% of the total portfolio and 49% of the portfolio comprised floating rate assets. We also expect the floating rate percentage to increase in the near future, with our current pipeline. Investments which are pre-operational represented 14% of total assets.

The Company's invested portfolio remains geographically diverse with 52% located across the US, 19% in the UK, 27% in Europe, and 2% 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 following investments settled in June:

• A loan of £57.4m to Montreux HoldCo Facility, a specialist owner of mental healthcare services in the UK, specifically the Active Care Group, a UK national provider of accommodation and complex care services;

• An additional loan of £9.5m to Project Spinnaker, a high-speed Broadband provider in the UK;

• An advance of $1.44m 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 $0.3m disbursement to Lanthanum, a leading developer of hyperscale data centres in Virginia, USA.

The Investment Advisor continues to focus on the Company's non-performing loans, as discussed below:

•  Bulb Energy: the administrators of Simple and Bulb continue to progress on the M&A process, and we will be able to update investors once that concludes. Our loan has been marked up slightly this month to reflect anticipated improvements in our recovery in a range of possible scenarios;

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

• Whittle School: the borrower has continued the execution of its strategy for the property, and has started the legal process of terminating the defaulted lease with Whittle School and the initial court hearing expected on 2 September 2022. This court process may not be necessary, however, as Whittle School has already announced it is leaving the premises. Further information will be provided as matters progress.

The following assets sold or prepaid in June:

• A loan of $50m to Corral Petroleum Holdings, a Swedish refiner and distributor of oil and petroleum products.

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 2025	GBP	Private	Senior	63.5	Accommodation	Health care	7.39	8.08
AP Wireless US Holdco	USD	Private	HoldCo	60.6	TMT	Telecom towers	6.10	8.01
AP Wireless Junior	EUR	Private	Mezz	57.8	TMT	Telecom towers	6.65	7.45
Montreux HoldCo Facility	GBP	Private	HoldCo	57.4	Accommodation	Health care	11.45	11.45
Infinis Energy	GBP	Private	Senior	57.0	Renewables	Landfill gas	5.71	6.78
GenOn Bowline Senior Secured 2026	USD	Private	Senior	56.4	Power	Energy transition	8.00	7.99
Tracy Hills TL 2025	USD	Private	Senior	56.3	Other	Residential infra	9.67	9.67
Hawkeye Solar HoldCo 2030 1, 2, and 3	USD	Private	HoldCo	53.9	Renewables	Solar & wind	9.12	10.03
Brightline	USD	Private	Senior	53.6	Transport	Rail	8.58	9.47
Project Camden	EUR	Private	HoldCo	53.0	Power	Base load	7.91	8.77
Madrid Metro	EUR	Private	HoldCo	52.1	Transport assets	Rolling stock	1.40	7.12
Expedient Data Centers Senior Secured 2026	USD	Private	Senior	51.5	TMT	Data centers	7.75	8.43
Sacramento Data Centre Senior Secured 2028	USD	Private	Senior	47.5	TMT	Data centers	7.36	8.06
Lightspeed Fibre Group Ltd	GBP	Private	Senior	45.6	TMT	Broadband	7.95	9.00
Kenai HoldCo 2024	EUR	Private	HoldCo	43.9	Power	Base load	0.00	11.88

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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