Net Asset Value and Investment Update

RNS Number : 8731I

Sequoia Economic Infra Inc Fd Ld

14 December 2015

 

14 December 2015

Sequoia Economic Infrastructure Income Fund Limited

Net Asset Value as at 30 November 2015 and Investment Update

Ordinary Share update

As of the 30th November 2015, the Ordinary share class held 13 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 8.0% and a weighted average life across the acquired portfolio of approximately 6.6 years.

In aggregate, the value of these investments is approximately 96.8% excluding accrued interest, of the Net Asset Value of the Company, which will rise to 97.7% when an incremental investment in one loan settles. 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 November, the Company sold its entire investment of €3m in the Senvion 6.625% bonds at a price of 104 plus accrued interest, having acquired them at a price of 99.25 in early June, resulting in a realised IRR of 17.5%.

The Company has successfully negotiated with the providers of its foreign exchange hedging to release all the collateral that they were holding, and this cash, together with the proceeds from the sale of the Senvion bonds, has been invested firstly in a €5m senior unlisted bond issued by DBB Jack-up Services A/S, the market-leading provider of O&M services to offshore wind installations, which pays a coupon of Euribor+8.5% and, secondly, in a incremental investment of $2.7m in the Castlelake 2014-1 B loan which pays a coupon of 7.5%.

The Ordinary Shares paid their second dividend of 1p per share in November, and have delivered a total return (annualised) of 8.2% to investors in the IPO.

The decrease in the Ordinary share NAV to 95.61p from 95.95p per share arose primarily through:

· Payment of the quarterly dividend of 1.0p;

· Interest income net of expenses of 0.40p;

· A gain of 0.62p on FX movements; and

· A decline of 0.36p 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	13.7	Renewables	Solar & Wind	7.00
Biffa TL A	GBP	Private	Senior	12.9	Utility	Waste	6.69
Exeltium Mezzanine	EUR	Private	Mezz	11.2	Power	PPA	8.50
Danaos Snr Secured 2018	USD	Private	Senior	8.6	Transport assets	Shipping	8.14
Dulles Greenway 2029	USD	Public	Senior	7.9	Transport	Road	6.88
North Las Vegas Water 6.572% 2040	USD	Public	Senior	7.3	Utility	Water	7.43
Invenergy TL B	USD	Private	Senior	6.6	Power	Electricity Generation	6.50
Global Ship Lease 10% 2019	USD	Public	Senior	6.5	Transport assets	Shipping	10.53
Green Plains TL B	USD	Private	Senior	6.5	Other	Alternative fuel	6.69
Ascendos Rail 2nd lien	EUR	Private	Mezz	5.1	Transport assets	Rail	4.81

Note (1) - excluding accrued interest

C Share update

At month end, the C Share class held three private debt investments and four infrastructure bonds, with a further three loans in the process of settlement. These assets are collectively valued at £61.4m ⁽²⁾, with an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 6.8% and a weighted average life across the acquired portfolio of approximately 4.7 years.

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

The Investment Adviser continues to see excellent 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 stable level of the C Share NAV of 97.99 pence arose through modest portfolio gains cancelled out by FX losses, and interest income covering the C Share operating costs.

Note (2) - Including accrued interest, and with investments in the process of settlement valued at cost

C Share Portfolio Summary (all settled trades)

Transaction name	Currency	Type	Ranking	Value £mm (3)	Sector	Sub-sector	Yield to maturity / worst (%)
A'lienor S.A.S. (A65)	EUR	Private	Senior	25.1	Transport	Road	5.80
Reliance Rail Finance 2018	AUD	Private	Senior	5.8	Transport assets	Rolling Stock	5.95
Exeltium Mezzanine	EUR	Private	Mezz	5.2	Power	PPA	8.50
GFL  7.5% 2020	CAD	Public	Senior	3.9	Utility	Waste	7.94
First Energy Solutions 6.8% 2039	USD	Public	Senior	3.3	Power	Electricity Generation	6.98
Bristow Group 6.25% 2022	USD	Public	Mezz	2.5	Transport assets	Aircraft	8.78
Care UK L+500 2019	GBP	Public	Senior	1.9	Accommodation	Elderly care	8.14

Note (3) - excluding accrued interest

Market Summary

November showed some activity in the infrastructure debt sector with seven transactions closing across the UK and Western Europe. Notable deals included the €3.3bn refinancing of Veolia's revolving credit facility and the €900m acquisition of Finerge by First State Wind Energy. In addition, there was a £284m refinancing of a 110MW portfolio of UK solar projects by Lightsource Renewable Energy.

Sterling fell from $1.54 to $1.50 against the US dollar in November. The euro however weakened against sterling ending at £0.70 compared with £0.71 at the end of October.

US news flow was again dominated by the debate over a potential interest rate hike at the next Fed meeting on the 16th December.  The Eurozone economy grew 1.6% year-on-year in 3Q2015, the fastest growth rate in 4 years. Expectation of ECB action regarding monetary policy easing grew over the month. The Bloomberg USD High Yield Corporate Bond Index fell to 149 from 152, following a sharp increase in October.

10-year US Treasury rates rose by 7 bps to 2.21%. Euro term rates fell slightly over the month with 10-year Bund yielding 47bps, down by 9bps at the start of the November.

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

It remains the Company's objective to provide investors with regular, sustained, long-term distributions and capital appreciation from a diversified portfolio of senior and subordinated economic infrastructure debt investments. Accordingly, the Company's policy is not to invest any of its assets into equity products, including of other listed closed-ended investment funds. As such, the Company considers its shares to be eligible investments, under the FCA's Listing Rule 15.4.5, for other listed closed-ended investment funds.

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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