Monthly Net Asset Value and Covid-19 update

RNS Number : 8395K

SQN Asset Finance Income Fund Ltd

24 April 2020

 

24 April 2020

SQN Asset Finance Income Fund Limited

Monthly Net Asset Value and Covid-19 Update

SQN Asset Finance Income Fund Limited (the "Company"), provides the following monthly net asset value ("NAV") and general update on the impact of Covid-19 on the portfolio.

Net Asset Value and Performance

As at 31 March 2020, the unaudited estimated NAV per Ordinary Share was 69.82 pence.

As at 31 March 2020, the unaudited estimated NAV per C Share was 97.00 pence .

The Company also announces the cumulative NAV total return¹ performance as at 31 March 2020, as follows:

Share class	Month-to-month return	1 year return	3 year return	Return since inception
Ordinary shares	(1.27)%	(21.53)%	(11.68)%	4.73%
C shares	(0.30)%	6.55%	14.21%	14.07%

Shareholders should note that the hedging of non-Sterling balances into Sterling has been lifted and, therefore, the returns during March contain some foreign exchange impacts.

Impact of Covid-19

The Investment Managers have been actively engaged with most of the counterparties in the portfolio. The majority of borrowers and lessees have sufficient cash flow to continue to make payments though all companies have adopted cash-conservation strategies based on the uncertain timelines that restrictions on economic activity will be in place.

Against this backdrop, we are able to report that the majority of payments due in March were received as expected. The notable exceptions were the payments due on the loans secured by marine vessels with a single counterparty. The Investment Managers had already been working with this group of companies to improve the loan to value of this investment as weakness in the vessel market preceded the emergence of Covid-19 which has then contributed to further weakness. The Investment Managers will continue to work with the borrower through this period and closely monitor the collateral package.

The Company has a solid track record in lending against marine vessels even in distressed periods. The Company realized a compounded return in excess of 9% on the four multiple vessels that were previously restructured. On 8 April 2020, the Company was able to conclude the sale of an unrelated marine vessel that was previously the subject of a restructuring and repositioning with a new operator.  The sale resulted in the Company receiving cash proceeds in excess of the outstanding investment balancing making it the 12^th restructured transaction to deliver a premium over the originally targeted return upon final disposition.

The Company has previously adopted a policy, in accordance with IFRS 9, to record provisions against transactions where there is the increased potential for a credit loss. The majority of the counterparties reporting an expected delay in payments already had been identified as Stage 2 or Stage 3 investments and provisioned for accordingly. These include, among others, the restructured lease for the papermill in Scotland and the automobile parts manufacturing equipment in France. The Investment Managers do not believe further provisions are required, at this time, for any of the investments in this category.

Two investments without previous provisions have engaged with the Investment Managers seeking temporary relief on principal and interest payments due to the Company. One of those is a recycling business which has experienced a severe reduction in activity. It is expected that this business will return to normal operations once restrictions are lifted.

The other investment is in remote operated vehicles which are currently being utilised in the offshore oil industry. The dual effect of lower oil prices and Covid-19 has resulted in a temporary decrease in utilisation and a slowdown in payments received by the lessee. The underlying assets are versatile and long-lived with applications across multiple industries. Should a repositioning be necessary, the secondary market should support the Company's investment over the long-term.

Performance Footnote¹

The NAV total return details the change in NAV from the start of the relevant period and assumes that dividends paid to shareholders are reinvested at NAV.

Factsheet

The Company's factsheet for March 2020 will shortly be available on the website:  www.sqncapital.com/managed-funds/sqn-asset-finance-income-fund . 

For further information please contact:

SQN Capital Management, LLC Jeremiah Silkowski  [e-mail] Nicola Bird    [e-mail]   Catherine Halford Riera    [e-mail]	01932 575 888
Winterflood Securities Limited	020 3100 0000
Neil Langford Chris Mills
Buchanan Charles Ryland Victoria Hayns Henry Wilson	020 7466 5000

Notes to Editor

The Company invests in equipment lease and asset finance arrangements across a diverse portfolio of assets and industries predominantly in the UK, Northern Europe and US. The Company focuses on business-essential, revenue-producing (or cost saving) equipment and other assets with high in-place value and long economic life relative to the investment term.

The Company's Investment Managers are SQN Capital Management, LLC, a Registered Investment Advisor with the United States Securities and Exchange Commission and its subsidiary, SQN Capital Management (UK) Limited. The principal responsible for managing the portfolio is Jeremiah Silkowski.

 

END

 

 

MSCSESFDLESSEEL