REG - Sequoia Econ Infra - NAV and Investment Update

Sequoia Economic Infrastructure Income FundAnnouncement

17/05/2022 07:00

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RNS Number : 6751L  Sequoia Economic Infra Inc Fd Ld  17 May 2022

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO
THE UNITED STATES

 

17(th) May 2022

Sequoia Economic Infrastructure Income Fund Limited

("SEQI" or the "Company")

NAV update

The NAV for SEQI, the specialist investor in economic infrastructure debt,
decreased marginally to 98.75 pence per share from the prior month's NAV of
98.94 pence per share, (being the 31 March 2022 cum‑income NAV of 100.50
pence per share less the dividend of 1.5625 pence per share in respect of the
quarter ended 31 March 2022), representing a decrease of 0.19 pence per share.

 

A full attribution of the changes in the NAV per share is as follows:

                                   pence per share
 March NAV                         100.50

 Interest income, net of expenses   0.61
 FX movements, net of hedges       0.09

 Dividends                         -1.56
 Decrease in asset valuations                -0.89
 April NAV                         98.75

Portfolio update

 

Over the month, yield curves in US Dollars, Sterling and Euros rose
materially, with, for example, 10-year Treasuries rising from 2.4% to 2.9% and
10-year Gilts rising from 1.6% to 1.9%. This resulted in the values on many
fixed rates loans falling, and explains a substantial part of the fall in the
NAV this month. It should be noted that this decline is simply a timing effect
as the price of those fixed rate loans will accrete back up to par as they get
closer to their maturity dates.

 

As at 29 April 2022, the Company had cash of £107.7m and had drawn £123.3m
on its £325m revolving credit facility. The Company also had undrawn
commitments on existing investments collectively valued at £65.5m. The
Company's invested portfolio consisted of 65 private debt investments and 8
infrastructure bonds across 8 sectors and 29 sub‑sectors. It had an
annualised yield‑to‑maturity (or yield‑to‑worst in the case of
callable bonds) of 8.8% and a cash yield of 6.5%. The weighted average
portfolio life is approximately 4.1 years. Private debt investments
represented 95% of the total portfolio and 50% of the portfolio comprised
floating rate assets. Investments which are pre‑operational represented 13%
of total assets.

 

The Company's invested portfolio remains geographically diverse with 51%
located across the US, 17% in the UK, 27% in Europe, and 5% in Australia/New
Zealand. Currently the Company is not investing in Portugal or Italy but has
selectively invested in opportunities in Spain. The Company's pipeline of
economic infrastructure debt investments remains strong and is diversified by
sector, sub‑sector, and jurisdiction. At month end, approximately 100% of
the Company's NAV consisted of either Sterling assets or was hedged into
Sterling. The Company has adequate resources to cover margin calls on its
hedging book.

 

The Investment Advisor continues to focus on the Company's non-performing
loans. While the values on the Company's loans to Bulb Energy, Salt Lake
Potash and the school in Washington are more-or-less unchanged over the month,
progress is being made on each one:

 

• Bulb Energy: shortly after the end of the month, the Company received an
interim distribution of £10.0 million from the administrators appointed to
Simple Energy (the parent of Bulb Energy). This is sufficient to pay all the
interest that had accrued on the loan since the borrower entered
administration, and also to reduce the loan balance by approximately £7.5m;
Bulb's value is now approximately 1.3% of NAV. Further distributions are also
expected; and

• Salt Lake Potash: the Investment Advisor continues to work with the
Receiver and other parties on the resolution of this investment. Currently,
there is a M&A process underway to sell the business, which is expected to
be completed over the coming months, at which point a fuller disclosure can be
made to investors; and

• Washington school: the Investment Adviser has made substantial progress on
putting the capital structure of the borrower on to a more stable, long-term
basis and expects the definitive documentation in relation to that to be
signed shortly.

 

 

The Company's settled investment activities during April include:

 

• an advance of $1.4m under the Salt Lake Potash Super Senior Facility, an
Australian potash facility in Australia. This is a super-senior liquidity
facility to a non-performing asset. The purpose of the loan is to finance the
company during the restructuring process; and

• an additional $0.2m disbursement to Lanthanum, a leading developer of
hyperscale data centres in the USA.

 

 

 

 

The following assets sold or prepaid in April:

 

• a loan of $19.1m to Sierra, a HoldCo financing of a portfolio of nine
Californian gas turbines;

• an interim distribution of £10.0m from the administrators appointed to
Simple Energy (the parent of Bulb Energy), a UK-based energy provider. Bulb's
value is now approximately 1.3% of NAV. Further distributions are expected;
and

• a full sale of our Talen 2025 and 2026 Bonds for $3.7m and $3.8m
respectively thereby avoiding having to participate in the subsequent Chapter
11 Bankruptcy proceedings announced last week.

 

Ordinary Portfolio Summary (15 largest settled investments)

 Investment name           Currency  Type     Ranking  Value £m((1))   Sector            Sub-sector         Cash-on-cash yield (%)  Yield to maturity / worst (%)

 Bannister Senior Secured  GBP       Private  Senior   64.7            Accommodation     Health care        7.29                    7.57
 Hawaiki Mezzanine Loan    USD       Private  Mezz     61.4            TMT               Undersea cable     8.31                    8.66
 Infinis Energy            GBP       Private  Senior   60.9            Renewables        Landfill gas       5.34                    5.86
 AP Wireless Junior        EUR       Private  Mezz     59.6            TMT               Telecom towers     6.28                    6.34
 AP Wireless US Holdco     USD       Private  HoldCo   54.6            TMT               Telecom towers     6.05                    6.83
 Tracy Hills TL 2025       USD       Private  Senior   54.5            Other             Residential infra  8.76                    8.76
 Hawkeye Solar HoldCo      USD       Private  HoldCo   54.4            Renewables        Solar & wind       8.75                    9.26
 Project Camden            EUR       Private  HoldCo   53.6            Power             Base load          7.62                    7.88
 Brightline                USD       Private  Senior   53.2            Transport         Rail               8.37                    8.94
 Madrid Metro              EUR       Private  HoldCo   51.9            Transport assets  Rolling stock      1.34                    6.09
 Expedient Data Centers    USD       Private  Senior   51.7            TMT               Data centers       6.31                    6.31
 Lightspeed Fibre Group    GBP       Private  Senior   50.1            TMT               Broadband          6.69                    6.69
 Sacramento Data Centre    USD       Private  Senior   48.4            TMT               Data centers       7.00                    7.00
 Project Nimble            EUR       Private  HoldCo   44.4            TMT               Data centers       8.35                    9.14
 Kenai HoldCo 2024         EUR       Private  HoldCo   42.8            Power             Base load          0.00                    11.43

Note (1) - excluding accrued interest

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

LEI: 2138006OW12FQHJ6PX91

This announcement is not for publication or distribution, directly or
indirectly, in or into the United States of America. This announcement is not
an offer of securities for sale into the United States.  The securities
referred to herein have not been and will not be registered under the U.S.
Securities Act of 1933, as amended, and may not be offered or sold in the
United States, except pursuant to an applicable exemption from registration.
No public offering of securities is being made in the United States.

For further information please contact:

Sequoia Investment Management
Company                              +44 (0)20
7079 0480

Steve Cook

Dolf Kohnhorst

Randall Sandstrom

Greg Taylor

Anurag Gupta

 

Jefferies International
Limited
+44 (0)20 7029 8000

Gaudi le Roux

Neil Winward

 

Tulchan Communications (Financial
PR)                                    +44
(0)20 7353 4200

Martin Pengelley

Elizabeth Snow

Laura Marshall

 

Sanne Fund Services Guernsey Limited

(Company Secretary)
 
+44 (0) 1481 755530

Matt Falla

Katrina
Rowe

 

About Sequoia Economic Infrastructure Income Fund Limited

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.

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