NAV and Investment Update

RNS Number : 8226S

Sequoia Economic Infra Inc Fd Ld

14 March 2023

 

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

14^th March 2023

Sequoia Economic Infrastructure Income Fund Limited

("SEQI" or the "Company")

NAV update

The NAV per share for SEQI, the specialist investor in economic infrastructure debt, decreased to 93.10 pence per share from the prior month's NAV per share of 93.55 pence per share, representing a decrease of 0.45 pence per share. A full attribution of the changes in the NAV per share is as follows:

	pence per share
January NAV	93.55
Interest income, net of expenses	0.68
Asset valuations, FX movements net of hedges	-1.14
Subscriptions/Redemptions	0.01
February NAV	93.10

As the Company is approximately 100% currency hedged, it does not expect to realise any material FX gains or losses over the life of its investments. However, the Company's NAV may include unrealised short-term FX gains or losses, driven by differences in the valuation methodologies of its FX hedges and the underlying investments - such movements will typically reverse over time.

Dividends and share buyback

The Company announces that the next expected dividend declaration date will be on 20 April 2023. This will be the second quarterly dividend at the new, higher dividend target, which was increased by 10% in November 2022 to 6.875 pence p.a.

During February 2023 the Company purchased 1,736,295 of its ordinary shares in the market at an average purchase price of 85.00 pence per share. Following this, the Company holds 23,978,661 ordinary shares in Treasury.

Portfolio update

As at 28 February 2023, the Company had cash of £40.1m and had drawn 163.9m on its £325.0m revolving credit facility with the remaining balance available to support the Company's working capital and liquidity requirements. The Company also had undrawn commitments on existing investments collectively valued at £63.7m.

The Company's invested portfolio consisted of 59 private debt investments and 5 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 11.8% and a cash yield of 7.5%. The increase in yield-to-maturity from 11.4% in January 2023 to 11.8% in February 2023 is mainly attributable to the rising interest rate environment and the Company's exposure to floating rate investments, which comprise 59% of the portfolio as of February 2023. The weighted average portfolio life is approximately 3.5 years. Private debt investments represented 98% of the total portfolio. The Company's invested portfolio remains geographically diverse with 50.8% located across the US, 25.2% in the UK, 23.8% in Europe, and 0.2% in Australia/New Zealand.

Recent reductions in asset values continue to be primarily due to increases in risk-free rates and credit spreads. Investors are reminded that these declines are unrealised mark-to-market adjustments that should reverse over time as the investments approach their repayment date (the "pull-to-par" effect). As at February 2023, the pull-to-par is estimated to be worth approximately 6.9p/share over the course of the life of the Company's investments.

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 liquidity to cover margin calls on its hedging book.

The following investments settled in February (excluding small loan drawings of less than £0.5m):

• An additional loan of £1.3m to Clyde Street, a hotel construction project in Scotland ; and

• An additional loan for PLN 7.1m (equivalent to £1.3m) to Green Genius to finance the construction of solar PV projects in Poland.

The following investments were sold or prepaid in February:

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

• A partial paydown for $4.8m of a primary senior secured loan to GenOn Bowline, with 1st lien on a natural-gas plant serving the NYISO market;

• A partial sale for $4.5m of Windstream bonds, a high-speed broadband provider based in the US and

• A full sale of Start Ltd. bonds for $1.7m, a portfolio of 24 aircrafts on lease to 16 different airlines.

Non-performing loans

There has been ongoing progress over the past month in relation to the Company's non-performing loans and there has been no significant changes in their book value as at 28 February 2023.

The Company has agreed with the administrator of Simple Energy (which is the guarantor of the Company's loan to Bulb Energy) to, in effect, exchange approximately £11.3 million of its loan for a majority shareholding in Zoa. Zoa is a pioneering business that owns all the software developed by Bulb and has about 100 employees focused on further developing the software, which will be marketed to energy supply companies in the UK and elsewhere. Zoa is taking steps to raise additional, third-party equity (e.g. from venture capital or private equity funds) to support its growth.  Further updates will be provided to shareholders in the future when developments occur.

Investment Advisor ESG update

The Investment Advisor announced in February that is has been awarded the 2022 global award for Best ESG Infrastructure Investment Strategy by Capital Finance International (CFI), in recognition of its progress against its ESG commitments and framework. CFI's announcement of the award win can be seen at the following link: https://bit.ly/3YpNDzt.

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	60.8	Accommodation	Health care	11.72	13.07
AP Wireless US Holdco	USD	Private	HoldCo	59.7	TMT	Telecom towers	6.23	9.39
AP Wireless Junior	EUR	Private	Mezz	57.6	TMT	Telecom towers	6.89	8.33
Project Tyre	USD	Private	Senior	57.5	Transport assets	Specialist shipping	10.43	10.43
Montreux HoldCo Facility	GBP	Private	HoldCo	57.4	Accommodation	Health care	13.45	13.41
Tracy Hills TL 2025	USD	Private	Senior	56.7	Other	Residential infra	11.12	11.11
Lightspeed Fibre Group Ltd	GBP	Private	Senior	55.1	TMT	Broadband	6.70	13.89
Infinis Energy	GBP	Private	Senior	55.1	Renewables	Landfill gas	5.90	7.37
Hawkeye Solar HoldCo 2030	USD	Private	HoldCo	53.8	Renewables	Solar & wind	9.18	10.28
Expedient Data Centers Senior	USD	Private	Senior	52.6	TMT	Data centers	10.35	10.82
GenOn Bowline Senior Secured	USD	Private	Senior	50.3	Power	Energy transition	11.83	11.83
Workdry	GBP	Private	Senior	50.0	Utility	Utility Services	6.96	6.96
Project Spinnaker	GBP	Private	Senior	48.9	TMT	Broadband	8.99	9.49
EIF Van Hook TL B 2024	USD	Private	Senior	48.5	Utility	Midstream	10.20	9.81
Sacramento Data Centre Senior	USD	Private	Senior	46.1	TMT	Data centers	7.58	8.88

Note (1) - excluding accrued interest

Disclaimer: the dividend increase is a target and not a profit forecast

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

Stuart Klein

Tulchan Communications (Financial PR)  [phone]

Martin Pengelley

Elizabeth Snow

Sanne Fund Services Guernsey Limited   [phone]

(Company Secretary)   

Matt Falla 

Shona Darling 

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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