Net Asset Value(s)

RNS Number : 9920H

Sequoia Economic Infra Inc Fd Ld

14 June 2017

 

14 June 2017

Sequoia Economic Infrastructure Income Fund Limited

Net Asset Value as at 31 May 2017 and Investment Update

Ordinary Share update

The Board is pleased that the Ordinary Share Issue announced on 3 May was significantly oversubscribed and investor demand for the Issue exceeded the maximum issue size of £160 million.

The Board determined to issue 151,658,768 new Ordinary Shares at the Issue Price of 105.5 pence. Accordingly, the gross proceeds of the Issue were approximately £160 million. The Investment Adviser continues to see significant opportunities in the infrastructure debt market.

The increase in SEQI's NAV to 101.22p per share from 101.07p per share on 28th April 2017 arose primarily through:

·      Interest income net of expenses of 0.46p;

·      A decrease of 0.85p in asset valuations;

·      No effect from FX movements;

·      A gain of approximately 0.55p from the Ordinary Share Issue.

During May, the Company had invested or committed to invest a total of £27.4 million which resulted in the total invested portfolio representing approximately 76.7% of the Company's NAV (including cash from the issue of new shares) as of the 31st May 2017. As of the 31st May 2017, the Company had gross leverage of £40 million which has been drawn and partially deployed, and represents approximately 5.3% of NAV.

The portfolio held 29 private debt investments and 15 infrastructure bonds for a total of 44 investments that covered 8 sectors and 24 subsectors, and are collectively valued at £570.0 million including accrued interest with an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 8.5% and a weighted average life across the acquired portfolio of approximately 4.5 years.

The weighted average purchase price of the Company's acquired investments was approximately 96.4% of par, and of those, only 13% had some form of construction risk.

During May, Sterling fell slightly against the Euro and the Dollar, ending the month at €1.147 and $1.287 respectively, and the Bloomberg USD High Yield Corporate Bond Index rose to 178.8.  As of the 31st May 2017, approximately 89% of NAV consisted of either Sterling assets or was hedged into Sterling.

The Company has adequate resources to cover the cash costs associated with its hedging activities. Each of its FX hedge providers has credit lines to the Company which means that the margin calls on the hedge portfolio have been modest.

Approximately 50% of the invested portfolio comprises floating rate assets, with only two LIBOR floor above current LIBOR levels (EUR). As such, the portfolio's yield is likely to rise over time as LIBOR increases.

The Company's investment activities during May include (traded but unsettled):

·      Primary participation of £10 million in the new issue of Heathrow Finance PLC 3.875% 2027 bond issue;

·      Primary participation of $7.5 million in the C notes of the new Apollo Aviation 2017-1 aircraft securitization deal; and

·      Sale of the underperforming Danaos Senior Secured 2018 loan in order to reduce portfolio risk.

Ordinary Portfolio Summary (15 largest settled investments)

Transaction name	Currency	Type	Ranking	Value £m(1)	Sector	Sub-sector	Yield to maturity / worst (%)
A'lienor S.A.S. (A65)	EUR	Private	Senior	37.6	Transport	Road	3.4
AP Wireless Infrastructure	GBP	Private	Senior	33.0	TMT	Towers	6.2
Cory Environmental	GBP	Private	HoldCo	32.7	Utilities	Waste to Energy	8.5
Beamish HoldCo 2017	GBP	Private	Senior	30.0	Accommodation	Health Care	10.3
IO Data Centers LLC	USD	Private	Senior	29.1	TMT	Data Centers	9.0
Abteen Ventures LLC	USD	Private	Senior	27.2	TMT	Data Centers	8.0
Regard Group Mezzanine	GBP	Private	Mezz	23.3	Accommodation	Health Care	12.1
Natgasoline Senior Unsecured	USD	Private	Mezz	20.4	Other	Industrial Infrastructure	10.0
Exeltium Mezzanine	EUR	Private	Mezz	19.2	Power	PPA	9.4
Welcome Break No.1 Ltd	GBP	Private	Mezz	18.3	Transport	Motorway Services	8.3
NGG Finance 5.625% 2073	GBP	Public	Mezz	16.9	Utilities	Electricity Distribution	3.8
Neoen Production	EUR	Private	HoldCo	16.5	Renewables	Solar & Wind	7.0
Cheniere Corp Christi 7% 2024	USD	Public	Senior	13.0	Transport	Ports	4.8
NRG Energy Inc 7.25% 2026	USD	Public	Senior	12.7	Power	Electricity Generation	6.8
GFL 9.875% 2021	USD	Public	Senior	12.7	Utility	Waste	3.4

Note (1) - excluding accrued interest

Market Summary

A total of 24 project finance transactions closed in May throughout the Company's eligible jurisdictions, and worth, in aggregate, $12.5 billion. Notable transactions include the 200MW Borkum West II German Offshore Wind project which received €800 million of financing of which €591 million was debt, and the 600MW Carlsbad Gas-Fired Energy Centre, which is located in San Diego, California, and will replace an existing centre and is fully-contracted with a 20-year PPA with San Diego Gas & Electric.

Eurozone growth was strong in May, however inflation remains subdued and is believed to still require stimulus, according to Mario Draghi. While still dovish, ECB policymakers have noted that risks to the Eurozone's economic outlook are no longer predominantly negative.

The Federal Reserve signalled that a further increase in short-term rates is possible in June, and that reducing the size of its balance sheet will soon be a priority.

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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