Update on the Clyde Street and Bulb Energy loans

Sequoia Economic Infra Inc Fd Ld

04 December 2023

 

04 December 2023

Sequoia Economic Infrastructure Income Fund Limited

(the "Company" or "SEQI")

Portfolio Update

Update on the Company's loan to Clyde Street and Bulb Energy

Sequoia Economic Infrastructure Income Fund, the specialist investor in economic infrastructure debt, provides an update on its investments in Clyde Street and Bulb Energy.

Clyde Street

SEQI has a senior secured interest in a hotel in Clyde Street, Glasgow, Scotland. The hotel substantially opened in late August 2023 following a challenging construction period throughout the pandemic. Since then, it has been ramping up with growing occupancy however, a portion of the hotel remains unavailable, subject to internal fit-out.

The Investment Adviser has been working with the Borrower to develop plans to maximise recovery of the loan, while exploring options for addressing ongoing funding requirements. After considerable efforts to find a solution, the Investment Adviser has successfully petitioned the Court to appoint specialists from Interpath Advisory to act as Interim Managers and subsequently Administrators to optimise the asset realisation process and to secure the working capital necessary for its operations in the interim.

The Investment Adviser will be taking a conservative view on value and a downward valuation adjustment will be applied to this position, to be published in the next monthly factsheet. The ultimate recovery and  Net Asset Value (NAV) impact (total position represented c3.1% of NAV as at 31 October 2023) will depend on the outcome of the administration process.

The Investment Adviser is expecting the positive impact on NAV from Bulb Energy, as described below, to materially offset negative movements in this position.

Bulb Energy ("Bulb")

Following  a confidential mediation process and a partial settlement of claims with the Joint Energy Administrators of Bulb, SEQI expects to receive a distribution of £25 million in cash from Bulb. Of this amount, £9 million is expected shortly, and a further £16 million is expected (conditional on criteria which the Company expects to be met) in or shortly after September 2024. In certain limited circumstances, the latter amount may be deferred until or shortly after September 2025, although if that occurs the amount will increase from £16 million to £18.4 million.

The distribution will take the total recoveries from the defaulted loan to Bulb to £50.3 million, compared to the principal amount outstanding at the time the Special Administration took effect of £55 million. The recovered amount is comprised of £39 million in cash and £11.3 million in shares of Zoa Technologies Ltd ("Zoa"), a software company set up to redevelop Bulb's consumer technology platform and licence it to energy supply companies in the UK and elsewhere. Realisation of value from the Company's majority equity stake in Zoa will be dependent on Zoa's business performance and any future fundraise.  

Further distributions are expected over time from Simple Energy (the parent of Bulb) and the Company will update investors on progress on this. It is also possible that there may be further distributions by Bulb over time.   

Steve Cook, Director and Head of Portfolio Management of the Investor Adviser commented:

"Our experience is that restructuring or work-out phases like Clyde Street take time, however we will continue to work to ensure a fair outcome for all parties.

"On our loan to Bulb, it has indeed taken time, with a complicated two-year process to reach a resolution in a most difficult situation for all parties. We are pleased that we now expect to recover a large proportion of the loan owed by Bulb. Although lengthy, this successful process demonstrates the defensive nature of infrastructure assets with strong recovery potential for lenders."

For further information, please contact:

Sequoia Investment Management Company Steve Cook Randall Sandstrom Anurag Gupta	[phone]
Jefferies International Limited (Corporate Broker & Financial Adviser) Gaudi Le Roux Stuart Klein	[phone]
Vico Partners (Communications Adviser) John Sunnucks	[e-mail]
Sanne Fund Services (Guernsey) Limited (Company Secretary) Matt Falla Lisa Garnham	[phone]

Notes to Editors

1.    About Sequoia Economic Infrastructure Income Fund Limited

Sequoia Economic Infrastructure Income Fund is a closed-ended fund listed on the FTSE 250 Index of the London Stock Exchange. It invests in economic infrastructure private loans and bonds across a range of industries in stable, low-risk jurisdictions, creating equity-like returns with the protections of debt. It is the only London-listed fund investing exclusively in economic infrastructure debt.

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, a long-standing investment advisory team with extensive infrastructure debt origination, analysis, structuring and execution experience.

2.    History of Loan to Bulb Energy

·      2018-2021: SEQI invests in a £55 million senior secured loan to Bulb, guaranteed by its parent company, Simple Energy, which held its software and technology assets

·      Nov 2021: Bulb defaults on its loan to SEQI as Bulb enters a Special Administration Regime, leaving SEQI unable to enforce its senior security over Bulb's assets. At the same time, Administrators are appointed to Simple Energy

·      Feb 2022: The Joint Energy Administrators for Bulb, and the Administrators for Simple Energy jointly start a combined sales process for Simple Energy and Bulb

·      Oct 2022: Joint Energy Administrators enter into a sale transaction in relation to Bulb's business with Octopus Energy, conditional on court approval for an Energy Transfer Scheme

·      Oct 2022: UK government approves deal between the special administrators of Bulb and Octopus Energy to acquire Bulb's 1.5 million customers

·      Nov 2022: In a separate process, all of Simple Energy's technology and related employees were transferred into a new company, Simple Energy Technology Ltd ("SETL") which was later rebranded as Zoa

·      Nov 2022: SEQI is granted an option to acquire a majority stake in Zoa for £1, in exchange for approximately £11.3 million of its loan to Bulb. The option was exercised on 3^rd March 2023  

·      Dec 2022: The Energy Transfer Scheme takes effect

·      Mar 2023: SETL completes rebranding to Zoa

·      Nov 2023: SEQI and the Joint Special Administrators of Bulb agree to a partial settlement of SEQI's claim, taking total recoveries from the defaulted loan to £50.3m

3.    About Zoa Technologies LTD

Zoa was created in November 2022 following the transfer of the technology assets and product and technology teams from Simple Energy. Zoa has redeveloped Bulb's technology into a leading consumer energy platform that helps energy companies work with consumers to drive energy transition. Zoa's platform uses data and AI to let consumers understand and manage their energy usage, help them adopt electrified devices like EVs and solar panels and lower energy company costs by automating customer service.

 

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