Publication of Circular

RNS Number : 5460X

Sequoia Economic Infra Inc Fd Ld

06 May 2016

 

THIS ANNOUNCEMENT IS NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES (INCLUDING TO U.S. PERSONS, AS SUCH TERM IS DEFINED UNDER REGULATION S OF THE US SECURITIES ACT OF 1933, AS AMENDED, THE "SECURITIES ACT"), CANADA, AUSTRALIA, NEW ZEALAND, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

6 May 2016

Sequoia Economic Infrastructure Income Fund Limited (the "Company")

Publication of Circular

C Share Issue and Placing Programme

Further to the earlier announcement by the Company and the publication of the Company's Prospectus, the Board announces that it has published a Circular in relation to the Company's C Share Issue and Placing Programme. 

On 14 April 2016, the Board announced that it was considering raising new capital in order to take advantage of the growing set of attractive investment opportunities accessible to the Company for the benefit of existing investors. The Board values the support provided to it from its existing Shareholders and as such it intends to have a material element of pre-emption in the equity issue. The Company will seek admission of the C Shares to the standard segment of the Official List and to trading on the Main Market. The Company has today announced that it intends to proceed with the Open Offer, C Share Placing and Offer for Subscription for a target issue of 150 million new C Shares at an issue price of 100 pence per C Share (the "Issue"). Under the terms of the Open Offer, up to approximately 120 million C Shares will be made available to existing Qualifying Shareholders on the basis of 2 C Share for every 5 Ordinary Shares held. The Company may issue up to a maximum number of 200 million C Shares pursuant to the Issue. The costs of the Issue borne by the C Shareholders are not expected to exceed two per cent. of the Gross Issue Proceeds. The Investment Adviser is confident that substantially the full amount of the Net Issue Proceeds will be deployed within nine months after Initial Admission. Further details of the Issue are included in the Prospectus.

The Company also intends to issue up to 120 million Placing Programme Shares at an issue price calculated by reference to the Net Asset Value per Ordinary Share at the time of allotment together with a premium intended to cover the costs and expenses of the relevant placing of Ordinary Shares (including, without limitation, any placing commissions) and the initial investment of the amounts raised pursuant to the Placing Programme. It is the intention of the Directors, however, that no Placing Programme Shares will be issued until after Conversion. The net proceeds of the Placing Programme are dependent on the number of Placing Programme Shares issued pursuant to the Placing Programme.

To the extent that an existing Shareholder holds or, in the previous 12 months has held, Ordinary Shares representing 10 per cent. or more of the current issued share capital of the Company, such a Shareholder is considered a related party of the Company for the purposes of the Listing Rules. As a substantial shareholder of the Company, SEB Pensionsforsikring A/S and any of its Associates (together, the "Related Party") is considered a related party. Whilst the Related Party has not yet agreed to participate in the Issue or the Placing Programme, in the event that the Related Party participates in the C Share Placing, Offer for Subscription and/or the Placing Programme its participation would be expected to be treated as a related party transaction for the purposes of the Listing Rules. Consequently, should the Related Party wish to participate in the C Share Placing, Offer for Subscription and/or the Placing Programme above certain amounts, its participation will be dependent upon the prior approval of the independent Shareholders of the Company.

Accordingly and in compliance with the Companies Law and the Listing Rules, the Board is seeking Shareholder approval in connection with certain matters relating to the proposed Issue and Placing Programme. An EGM of the Company is being convened at which Shareholders will be asked to:

·      approve the potential Issue Related Party Transaction, that may arise with respect to the Related Party that may wish to participate in the C Share Placing and/or Offer for Subscription ("Resolution 1");

·      approve the potential Placing Programme Related Party Transaction which may arise with respect to the Related Party wishing to participate in the Placing Programme ("Resolution 2");

·      approve the disapplication of pre-emption rights in respect of up to 200 million C Shares for the purposes of the Issue and up to 120 million Ordinary Shares for the purposes of the Placing Programme ("Resolution 3");

·      approve amendments to the existing Articles in order to amend the definition of 'Calculation Time' (as currently set out in the existing Articles) to allow Conversion to take place as it is described below ("Resolution 4"); and

·      approve the continuation of the Company in accordance with article 35.4 of the Articles ("Resolution 5").

Benefits of the Issue and Placing Programme

The Board believes that the Issue will have the following benefits:

A.     provide the Company with additional capital to take advantage of the currently available pipeline opportunities which should enable the Company to further diversify its existing portfolio;

B.    spread the Company's fixed running costs across a wider base of shareholders, thereby reducing the Company's ongoing charges and allowing the potential for better returns to investors;

C.    a greater number of Shares in issue and a wider base of shareholders is likely to improve liquidity in the market;

D.    increase the size of the Company which should help make the Company more attractive to a wider base of investors;

E.    the issue of further equity in the form of C Shares is designed to overcome the potential disadvantages for existing Shareholders which could arise out of a conventional fixed price issue of further Shares for cash;

F.     the availability of a pre-emptive Open Offer in respect of c.£120 million of the Issue recognises the support provided by existing Shareholders, while the availability of C Shares to new investors under the Placing and Offer for Subscription, offers the prospect of a more diversified shareholder base, and an increased opportunity to grow the Company with the benefits of scale and liquidity mentioned above for existing Shareholders; and

G.    The Directors believe that the potential to issue shares at a price above NAV in the Placing Programme will create the potential to enhance NAV per Ordinary Share of existing Shareholders, after related costs have been deducted.

The Resolutions

Issue Related Party Transaction (Resolution 1)

The approval of a related party transaction by Shareholders is required pursuant to Chapter 11 of the UK Listing Authority's Listing Rules. As a substantial shareholder of the Company, the Related Party is considered a related party for the purposes of the Listing Rules and the Board anticipates that it may potentially wish to subscribe for C Shares. SEB Pensionsforsikring A/S currently holds c.29.9m shares in the Company equivalent to approximately 18.5 per cent. of the shares in issue.

Therefore, the participation by the Related Party in the Placing and/or Offer for Subscription will be treated as a related party transaction and will require the approval of independent Shareholders because they are likely to breach, in terms of size, certain specified percentage ratios under the Listing Rules.

Although the Related Party has not yet agreed to participate in the Issue, it is proposed that the Related Party will be able to subscribe for C Shares issued pursuant to the C Share Placing and/or Offer for Subscription, provided that their shareholding in the Company, in aggregate with any shareholding in the Company of any concert parties (as defined in the City Code on Takeovers and Mergers), following their individual participation in the Issue represents no more than 29.99 per cent. of the issued share capital of the Company following Admission. Should the Related Party choose to participate in the C Share Placing and/or Offer for Subscription, its participation will be on the same terms as other subscribers (i.e. it shall pay £1.00 per C Share for which it subscribes). The participation by the Related Party in the C Share Placing and/or Offer for Subscription may dilute the percentage holding of an existing Shareholder to the extent that the existing Shareholder does not participate in the Issue. In the event that applications under the C Share Placing and/or Offer for Subscription cannot be satisfied in full, applications from the Related Party will be scaled back on the same methodology as is applicable to other Shareholders in each of the C Share Placing and the Offer for Subscription.

The Directors believe that the approval of the Issue Related Party Transaction is beneficial to the overall Issue.

The Shareholders will approve the Issue Related Party Transaction through Resolution 1, which is to be proposed as an ordinary resolution at the EGM. The Related Party will not vote on Resolution 1, and has undertaken to take all reasonable steps to ensure that its Associates will not vote on Resolution 1. The Issue is not conditional on the passing of Resolution 1.

Placing Programme Related Party Transaction (Resolution 2)

The approval of the Placing Programme Related Party Transaction by Shareholders is required pursuant to Chapter 11 of the UK Listing Authority's Listing Rules. As a substantial shareholder of the Company, the Related Party is a related party for the purposes of the Listing Rules and the Board anticipates that it may potentially wish to subscribe for Placing Programme Shares.

Therefore, any participation by the Related Party in the Placing Programme would be treated as a Placing Programme Related Party Transaction and would require the approval of independent Shareholders, to the extent that such participation breaches, in terms of size, certain specified thresholds under the Listing Rules. Although the Related Party has not yet agreed to participate in the Placing Programme, it is proposed that the Related Party will be able to subscribe for Ordinary Shares pursuant to the Placing Programme, provided that their shareholding in the Company, in aggregate with any shareholding in the Company of any relevant concert parties (as defined in the City Code on Takeovers and Mergers) following their individual participation in the Issue and Placing Programme, represents no more than 29.99 per cent. of the issued share capital of the Company following admission of the Placing Programme Shares. Should the Related Party choose to participate in the Placing Programme, its participation will be on the same terms as other subscribers. The participation by the Related Party in the Placing Programme may dilute the percentage holding of an existing Shareholder to the extent that the existing Shareholder does not participate in the Placing Programme.

The Directors believe that the approval of the Placing Programme Related Party Transaction is beneficial to the overall Placing Programme.

The Shareholders will approve the Placing Programme Related Party Transaction through Resolution 2, which is to be proposed as an ordinary resolution at the EGM. The Related Party will not vote on Resolution 2, and has undertaken to take all reasonable steps to ensure that its Associates will not vote on Resolution 2.

Disapplication of pre-emption rights by Shareholders (Resolution 3)

The Articles contain pre-emption rights in respect of the allotment or sale for cash of "equity securities" (which include Ordinary Shares or C Shares or rights to subscribe for or to convert securities into Ordinary Shares or C Shares), which can be disapplied by way of a special resolution. The pre-emption rights have been disapplied up to an aggregate amount not exceeding 10 per cent. of the Ordinary Shares from time to time in issue until the conclusion of the first annual general meeting of the Company (the "General Disapplication"). The Directors intend to request that the General Disapplication is renewed at the first annual general meeting of the Company and, thereafter, at each general meeting of the Company. Resolution 3 proposes that the pre-emption rights are disapplied in accordance with the Articles in respect of up to 200 million C Shares to be issued pursuant to the Issue. Resolution 3 will not affect the General Disapplication.

Notwithstanding the disapplication of pre-emption rights, the Directors recognise the importance of existing Shareholders' protections and consequently the Issue is being structured to include a material element of pre-emption via the Open Offer on the basis of 2 C Share for every 5 Ordinary Shares (which, if fully subscribed, would represent approximately 60.7 per cent. of the C Shares available under the Issue, assuming a maximum number of 200 million C Shares are issued pursuant to the Issue).

Resolution 3 also proposes that the pre-emption rights are disapplied in accordance with the Articles in respect of up to 120 million Ordinary Shares for the purposes of the Placing Programme. To the extent that a Shareholder does not participate in any such issue of Ordinary Shares under the Placing Programme, their existing shareholding may be diluted. For example, if 120 million Placing Programme Shares (being the maximum number of Placing Programme Shares available under the Placing Programme) are issued pursuant to the Placing Programme, there would be a dilution of approximately 28.4 per cent. in existing Shareholders' voting control of the Company (assuming no C Shares are issued under the Issue). However, the Directors believe that the potential to issue shares at a price above NAV in the Placing Programme will create the potential to enhance NAV per Ordinary Share of existing Shareholders, after related costs have been deducted.

The allotment of Placing Programme Shares is at the discretion of the Directors and may take place at any time prior to the final closing date of 5 May 2017. An announcement of each issue of Placing Programme Shares pursuant to the Placing Programme will be released through a Regulatory Information Service, including details of the number of Placing Programme Shares issued and the applicable Placing Programme price. It is the intention of the Directors, however, that no Placing Programme Shares will be issued until after Conversion

Amendments to Existing Articles (Resolution 4)

Resolution 4 will be proposed as a special resolution to make amendments to the existing Articles in order to amend the definition of 'Calculation Time'. The existing Articles include a definition of 'Calculation Time' which is defined as follows:

"Calculation Time means the earliest of:

a.     the close of business on the NAV Calculation Date on or immediately prior to the day on which at least 85 per cent. of the Net Proceeds (or such other percentage as the directors shall determine as part of the terms of issue of any tranche of C Shares or otherwise and for these purposes where more than one tranche of C Shares has been issued on the same date the directors may aggregate the Net Proceeds for each tranche in determining the percentage which has been invested or committed to be invested) have been invested or committed to be invested in accordance with the Company's investment policy;

b.     the close of business on the business day immediately before the day on which Force Majeure Circumstances have arisen or the directors resolve that they are in contemplation; and

c.     the close of business on such other date as the directors may determine at the date of issue of that tranche of C Shares."

The Directors consider that it would simplify and be of benefit to the overall process of Conversion of C Shares if the Articles are more flexible thereby enabling the Directors to have further discretion regarding determining the Calculation Time. Accordingly, if Resolution 4 is approved by the requisite majority of Shareholders, the definition of Calculation Time will be amended to read as follows:

"Calculation Time means the earliest of:

a.     the close of business on the date to be determined by the directors after the day on which at least 85 per cent. of the Net Proceeds (or such other percentage as the directors shall determine as part of the terms of issue of any tranche of C Shares or otherwise and for these purposes where more than one tranche of C Shares has been issued on the same date the directors may aggregate the Net Proceeds for each tranche in determining the percentage which has been invested or committed to be invested) have been invested or committed to be invested in accordance with the Company's investment policy;

b.     the close of business on the business day immediately before the day on which Force Majeure Circumstances have arisen or the directors resolve that they are in contemplation; and

c.     the close of business on such other date as the directors may determine in their sole discretion."

Continuation of the Company

Following the Company's successful IPO and the 2015 C share issue and in accordance with the Articles, the Directors are required to convene a general meeting of the Company on or before 3 September 2016 in order to propose an ordinary resolution that the Company continues its business as a closed-ended investment company (the "Continuation Resolution"). If the Continuation Resolution is passed, the Directors are required to convene a general meeting to propose a further Continuation Resolution every three years thereafter. The Company intends to put forth the Continuation Resolution at the EGM.

If a Continuation Resolution is not passed, the Directors are required to put forward proposals within six months for the reconstruction or reorganisation of the Company to the Shareholders for approval. These proposals may or may not involve winding up the Company and, accordingly, failure to pass the Continuation Resolution will not necessarily result in the winding up of the Company.

Shareholder resolutions

The proposed Issue and Placing Programme are conditional upon, amongst other things, the Company obtaining Shareholders' approval of the Resolution 3 and Resolution 5.

In order for the Issue to proceed, the Resolutions require the approval of Shareholders at the EGM. In order

to be passed, the Resolutions to be proposed at the EGM will require:

·      in the case of Resolutions 1, 2 and 5 which are to be proposed as ordinary resolutions, the approval of Shareholders representing more than 50 per cent. of the votes cast at the EGM; and

·      in the case of Resolutions 3 and 4 which are to be proposed as special resolutions, the approval of Shareholders representing at least 75 per cent. of the votes cast at the EGM

Copies of the Articles (including the existing Articles and a form of the Articles as amended pursuant to Resolution 4) and the monthly NAV announcements are available for inspection at: (i) the registered office of the Company at Sarnia House, Le Truchot, St Peter Port, Guernsey, GY1 1GR; and (ii) the offices of Jones Day at 21 Tudor Street, London, EC1V 8BR during normal business hours on any Business Day from the date of this document until the conclusion of the EGM, and at the place of the EGM for at least 15 minutes prior to, and during, the EGM

Expected EGM timetable

Latest time and date for receipt of forms of proxy                                   10.00 a.m. on 23 May 2016

General Meeting                                                                                            10.00 a.m. on 25 May 2016

A copy of the Circular has been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.morningstar.co.uk/uk/nsm.  A copy of the Circular is also available on the Company's website at http://www.seqifund.com/downloads.

Defined terms used in this announcement shall (unless the context otherwise requires) have the same meanings set out in the Company's Circular and Prospectus dated 6 May 2016.

For further information please contact:

Sequoia Investment Management Company Steve Cook Dolf Kohnhorst Randall Sandstrom Greg Taylor	[phone]
Stifel Nicolaus Europe Limited Neil Winward Mark Bloomfield Gaudi Le Roux	[phone]
Praxis Fund Services Limited (Company Secretary) Shona Darling	[phone]

About the Company

Sequoia Economic Infrastructure Income Fund Limited is a Guernsey-incorporated closed-ended investment company whose Ordinary Shares are traded on the main market of the London Stock Exchange. The Company's investment strategy is to provide shareholders with long-term distributions by owning debt exposures to economic infrastructure projects across a diversified range of jurisdictions, sectors and sub-sectors. The total net annual return target of the Company is seven to eight per cent. (by reference to the IPO price of £1 per Ordinary Share). The Company's Ordinary Shares were admitted to trading on the main market of the London Stock Exchange on 3 March 2015, following a successful, oversubscribed IPO.

IMPORTANT NOTICES

Neither this announcement nor the information contained herein is for release, publication or distribution, directly or indirectly, in or into the United States, South Africa, Canada, Australia, New Zealand or Japan or any other jurisdiction where to do so might constitute a violation of the relevant laws or regulations of such jurisdiction. The securities referred to herein have not been and will not be registered under the relevant securities laws of any such excluded territory.

This announcement does not contain, constitute or form part of an offer for sale of, resale of, transfer of or delivery of or the solicitation of an offer to purchase directly or indirectly, securities in the United States or to, or for the account or benefit of a  U.S. Person (as defined in Regulation S of the Securities Act). The securities referred to herein have not been, and will not, be registered under the Securities Act or any other applicable securities laws of, or with any securities regulatory authority of, any state or other jurisdiction of the United States, and may not be offered, sold, resold, transferred or delivered, directly or indirectly, in the United States or to, or for the account or benefit of, any U.S. Person absent registration or an applicable exemption from the registration requirements of the Securities Act.  Although the issuer does not intend to register any part of the proposed offering in the United States, any public offering in the United States would be made by means of a prospectus that could be obtained from the issuer and would contain detailed information about the company and management, as well as financial statements. The Company has not been and will not be registered under the U.S. Investment Company Act of 1940, as amended, and neither the Investment Manager nor the Investment Adviser will be registered as an investment adviser under the U.S. Investment Advisers Act of 1940, as amended.  Consequently, investors will not be entitled to the benefits and protections of the U.S. Investment Company Act of 1940, as amended or the U.S. Investment Advisers Act of 1940, as amended.  The shares of the Company will be offered and sold only to non-US persons outside the United States in reliance on Regulation S under the Securities Act.  There will be no offer of the Company's securities in the United States.  The distribution of this document may also be restricted by law in other jurisdictions.

This announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase or subscribe for any ordinary shares or any other securities nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract.

The distribution of this announcement may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

Subject to certain exceptions, the securities referred to herein may not be offered or sold in South Africa, Canada, Australia, New Zealand or Japan or to, or for the account or benefit of, any national, resident or citizen of Canada, Japan, Australia, New Zealand or South Africa. There will be no offer of the ordinary shares in the United States, Canada, South Africa, Japan, Australia or New Zealand.

In member states of the European Economic Area (the "EEA"), this announcement is directed only at (a) persons who are "qualified investors" as defined in section 86(7) of the Financial Services and Markets Act 2000 ("Qualified Investors") being persons falling within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC) (as amended, including by Directive 2010/73/EU, to the extent such amendments have been implemented in the relevant Member State and including any relevant implementing measure in the relevant Member State; (b) in the United Kingdom, Qualified Investors who are persons who (i) fall within article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"); (ii) fall within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations, etc") of the Order; or (iii) are persons to whom it may otherwise be lawfully communicated (all such persons together being referred to as "Relevant Persons").  This announcement must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this announcement relates is available only to Relevant Persons and will be engaged in only with relevant persons. 

Stifel Nicolaus Europe Limited ("Stifel"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for the Company and no-one else in connection with the potential equity issue. Stifel will not regard any other person as its client in relation to the potential issue and will not be responsible to anyone other than the Company for providing the protections afforded to its clients, nor for providing advice in relation to the potential issue, the contents of this announcement or any transaction, arrangement or other matter referred to herein.

Neither Stifel nor any of its directors, officers, employees, advisers, affiliates or agents accepts any responsibility or liability whatsoever for/or makes any representation or warranty, express or implied, as to the truth, accuracy or completeness of the information in this announcement (or whether any information has been omitted from the announcement) or any other information relating to the Company or its subsidiary, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of the announcement or its contents or otherwise arising in connection therewith.

The Company has been established in Guernsey and has been registered as a registered closed-ended collective investment scheme under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended. It is suitable only for professional or experienced investors, or those who have taken appropriate professional advice.

Regulatory requirements which may be deemed necessary for the protection of retail or inexperienced investors, do not apply to listed funds. By investing in the Company you will be deemed to be acknowledging that you are a professional or experienced investor, or have taken appropriate professional advice, and accept the reduced requirements accordingly.

You are wholly responsible for ensuring that all aspects of the Company are acceptable to you. Investment in listed funds may involve special risks that could lead to a loss of all or a substantial portion of such investment. Unless you fully understand and accept the nature of the Company and the potential risks inherent in it you should not invest in the Company.

Further information in relation to the regulatory treatment of listed funds domiciled in Guernsey may be found on the website of the Guernsey Financial Services Commission at http://www.gfsc.gg/The-Commission/Pages/Home.aspx.

 

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MSCUNSORNUAVRAR