Net Asset Value and Investment Update

RNS Number : 9381L

Sequoia Economic Infra Inc Fd Ld

15 January 2016

 

15 January 2016

Sequoia Economic Infrastructure Income Fund Limited

Net Asset Value as at 31 December 2015 and Investment Update

Ordinary Share update

As of the 31st December 2015, the Ordinary share class held 12 infrastructure bonds and 14 private debt investments, collectively valued at £140.7m including accrued interest, with an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 8.2% and a weighted average life across the acquired portfolio of approximately 6.6 years.

Approximately 45% of the Ordinary Share portfolio comprises floating rate assets, with only two LIBOR floors (other than those at zero percent). As such the portfolio's yield is likely to increase over time as LIBOR increases.

The investments are across the UK, Western Europe, Australia, Canada and the US and include the road, rail, utility, power, shipping, renewables and aircraft leasing sectors.

In December, the Company had its entire position in the West Atlantic bonds called at a price of 106.89 plus accrued interest, resulting in a realised IRR of 8.31%.

The increase in the Ordinary Share NAV to 96.50p from 95.61p per share arose primarily through:

· Interest income net of expenses of 0.49p;

· A gain of 1.55p on FX movements; and

· A decline of 1.15p in asset valuations.

Ordinary Share Portfolio Summary (ten largest investments)

Transaction name	Currency	Type	Ranking	Value £mm (1)	Sector	Sub-sector	Yield to maturity / worst (%)
Neoen Production 1 S.A.S.U	EUR	Private	HoldCo	14.4	Renewables	Solar & Wind	7.00
Biffa TL A	GBP	Private	Senior	12.9	Utility	Waste	6.84
Exeltium Mezzanine	EUR	Private	Mezz	11.8	Power	PPA	8.50
Danaos Snr Secured 2018	USD	Private	Senior	8.8	Transport assets	Shipping	8.14
Dulles Greenway 2029	USD	Public	Senior	7.7	Transport	Road	7.31
North Las Vegas Water 6.572% 2040	USD	Public	Senior	7.4	Utility	Water	7.52
Invenergy TL B	USD	Private	Senior	6.8	Power	Electricity Generation	6.50
Green Plains TL B	USD	Private	Senior	6.6	Other	Alternative fuel	6.72
Global Ship Lease 10% 2019	USD	Public	Senior	6.2	Transport assets	Shipping	13.13
Ascendos Rail 2nd lien	EUR	Private	Mezz	5.3	Transport assets	Rolling Stock	4.80

Note (1) - excluding accrued interest

C Share update

At month end, the C Share class held 6 infrastructure bonds and 7 private debt investments, with a further loan in the process of settlement. These assets are collectively valued at £107.2m including accrued interest and with investments in the process of settlement valued at cost, with an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 7.8% and a weighted average life across the acquired portfolio of approximately 3.5 years.

Approximately 51% of the C Share portfolio comprises floating rate assets. None of the floating rate USD assets has LIBOR floors, meaning that rising USD interest rates will feed through relatively rapidly to portfolio returns.

The investments are geographically diverse and cover the road, rail, aircraft and shipping leasing, power, renewable, utility and elderly care sectors.

Investments in December include:

· An incremental investment in the Reliance Rail bonds, backed by passenger rolling stock in Australia;

· A loan backed by student accommodation in The Hague;

· A bridge loan supporting Terra Firma's acquisition of Infinis plc;

· Bonds backed by commercial satellites;

· An incremental investment in a loan to Danaos Corporation, benefiting from corporate recourse as well as security over a portfolio of ships; and

· Bonds backed by a portfolio of aircraft leased to diversified airlines.

The Investment Adviser continues to see attractive opportunities for the deployment of capital in the economic infrastructure debt sector, and expects the overall yield on the Class C portfolio to be approximately 8% or higher, once fully invested. 

The increase in the C Share NAV to 99.56p from 97.99p per share arose primarily through:

· A gain of 1.22p on FX movements; and

· A gain of 0.32p in fee income and asset valuations.

C Share Portfolio Summary (ten largest investments)

Transaction name	Currency	Type	Ranking	Value £mm (2)	Sector	Sub-sector	Yield to maturity / worst (%)
A'lienor S.A.S. (A65)	EUR	Private	Senior	26.5	Transport	Road	5.80
Infinis Bridge	GBP	Private	HoldCo	24.0	Renewables	Solar & Wind	8.95
Danaos Snr Secured 2018	USD	Private	Senior	9.1	Transport assets	Shipping	8.14
Castlelake 2015-1 C	USD	Public	Mezz	6.7	Transport assets	Aircraft	10.14
Reliance Rail Finance 2018	AUD	Private	Senior	6.0	Transport assets	Rolling Stock	6.07
Exeltium Mezzanine	EUR	Private	Mezz	5.5	Power	PPA	8.50
Intelsat Jackson 7.25% 2019	USD	Public	Senior	5.0	TMT	Satellites	10.29
GFL  7.5% 2020	CAD	Public	Senior	3.9	Utility	Waste	7.95
Bristow Group 6.25% 2022	USD	Public	Mezz	3.7	Transport assets	Aircraft	10.79
Reliance Rail Finance 2019	AUD	Private	Senior	3.7	Transport assets	Rolling Stock	5.77

Note (2) - excluding accrued interest

Market Summary

December showed some activity in the infrastructure debt sector with 25 transactions closing across the UK and Western Europe. Notable deals included the €1.1bn refinancing of the 288MW Meerwind German offshore wind farm, as well as the £400m refinancing of the 3960MW Drax coal-fired power plant. In addition, there was a €176m primary debt financing of the Cloosh Valley Irish wind farm.

Sterling fell from $1.51 to $1.48 against the US dollar in December. The euro also strengthened against sterling ending at £0.74 compared with £0.70 at the end of November.

The Fed deciding to raise interest rates on the 16th December dominated US news flow. Inflation in the Eurozone remained weak, amidst investor calls for more action to be taken by the ECB.

The credit markets experienced a challenging month with a "risk-off" trend clearly apparent. The Bloomberg USD High Yield Corporate Bond Index fell to 145 from 149, following a moderate decline in November.

10-year US Treasury rates rose by 13 bps to 2.27%. Euro term rates also rose over the month with 10-year Bund yielding 63bps, up by 16bps at the start of the December.

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

Sequoia Investment Management Company

Randall Sandstrom / Steve Cook                         Telephone [phone]

Stifel Nicolaus Europe Limited

Neil Winward / Mark Bloomfield / Gaudi Le Roux              Telephone [phone]

International Fund Management Limited

Chris Hickling                                                                Telephone [phone]

About Sequoia Economic Infrastructure Income Fund Limited

The Company is a Guernsey registered closed-ended investment company that 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.  The Company has been advised that the Shares can be considered as "excluded securities" for the purposes of the FCA rules regarding the definition and promotion of Non-Mainstream Pooled Investments (NMPIs).

 

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