REG - Sequoia Econ Infra - NAV and Investment Update

Sequoia Economic Infrastructure Income FundAnnouncement

16/01/2025 07:00

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RNS Number : 4836T  Sequoia Economic Infra Inc Fd Ld  16 January 2025

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

 

 

Sequoia Economic Infrastructure Income Fund Limited

("SEQI" or the "Company")

 

Monthly NAV and portfolio update - December 2024

 

The NAV per share for SEQI, the largest LSE listed infrastructure debt fund,
increased to 94.91 pence per share from the prior month's NAV per share of
94.87 pence, representing an increase of 0.04 pence per share.

 

                                        pence per share
 30 November NAV                        94.87
 Interest income, net of expenses                0.73
 Asset valuations, net of FX movements          -0.71
 Subscriptions / share buybacks                  0.02
 31 December NAV                          94.91

 

 

No expected material FX gains or losses as portfolio is 100% currency-hedged.
However, the Company's NAV may include unrealised short-term FX gains or
losses, driven by differences in the valuation methodologies of its FX hedges
and the underlying investments - such movements will typically reverse over
time.

 

Well positioned to benefit from higher interest rates; 59.5% of portfolio is
in fixed rate investments as of December 2024, and 53.6% of the portfolio is
invested in Defensive sectors (Renewables, Digitalisation, Utility and
Accommodation).

 

 

Market Summary - December 2024

 

Interest rate announcements, inflation data and asset valuations

 

 ·             The European Central Bank ("the ECB") implemented a 0.25% rate cut on 12
               December, reducing its policy rate from 3.25% to 3.00%. This followed an
               earlier rate cut on 23 October 2024 for 0.25% and was part of the ECB's
               ongoing efforts to stimulate the Eurozone economy amid stabilizing energy
               markets. On 13 December 2024, the Federal Reserve reduced its policy rate by
               0.25%, from 4.75% to 4.50%. In the UK, the Bank of England ("the BoE") made no
               changes to its policy rate during December 2024 due to elevated inflation (CPI
               inflation rose to 2.6% during November 2024, surpassing the BoE's 2.0%
               target).

 ·             Despite interest rate reductions across the Eurozone, UK and US, long-end
               government bond yields rose by approximately 0.3% across all regions which was
               mainly due to inflationary pressures. As such, the asset valuation of most
               fixed rate instruments (59.5% of the portfolio) has declined marginally due to
               the increase in risk free rates. The portfolio pull-to-par, which is
               incremental to NAV as loans mature, is 3.7 pence per share as of December
               2024.

 ·             The Investment Adviser expects inflation to gradually abate during 2025 across
               all three regions due to stabilizing energy prices and improved supply chains.
               Once a downwards trend toward a lower interest rate environment unfolds, this
               will be supportive of the current fixed rate loans and bond positions.
               Further, as short-term rates begin to fall, yield curves will become less
               inverted or turn positive again, supporting a bid for risk in the market.

 ·             As inflation gradually abates in the long run, the likelihood of future
               interest rate cuts increases, which makes alternative investments such as
               infrastructure more attractive when compared to liquid debt. While the pace
               and size of interest rate cuts will vary across the Company's different
               investment jurisdictions, the general consensus remains one of declining
               interest rates throughout the year.

Portfolio update - December 2024

 

Revolving Credit Facility and cash holdings

 

 ·             The Company is undrawn on its revolving credit facility (RCF) of £300.0
               million and currently has cash of £68.7 million (inclusive of interest
               income), and undrawn investment commitments of £87.1 million.

 ·             The RCF is primarily utilised to manage cashflows through the timing of new
               investments against the repayment of existing investments.

 

Portfolio Composition

 

 ·             The Company's invested portfolio consisted of 54 private debt investments and
               4 infrastructure bonds, diversified across 8 sectors and 30 sub-sectors.

 ·             58.9% of the portfolio comprised of senior secured loans ensuring defensive
               positioning.

 ·             It had an annualised yield-to-maturity (or yield-to-worst in the case of
               callable bonds) of 9.76% and a cash yield of 7.3% (excluding deposit
               accounts).

 ·             The weighted average portfolio life increased slightly and is approximately
               3.5 years. This short duration means that as loans mature, the Company can
               take advantage of higher yields in the current interest rate environment.

 ·             Private debt investments represented 90.2% of the total portfolio, allowing
               the Company to capture illiquidity yield premiums.

 ·             The Company's invested portfolio currently consists of 40.5% floating rate
               investments and remains geographically diversified with 47.5% located across
               the USA, 24.9% in the UK, 27.5% in Europe, and 0.1% in Australia/New Zealand.

 

Portfolio highly diversified by sector and size

 

 

 

 

Share buybacks

 

 ·             The Company bought back 1,959,885 of its ordinary shares at an average
               purchase price of 78.5 pence per share in December 2024.

 ·             The Company first started buying back shares in July 2022 and has bought back
               201,302,167 ordinary shares as of 31 December 2024, with the buyback
               continuing into January 2025. This share repurchase activity by the Company
               continues to contribute positively to NAV accretion.

 

New investment activity during December 2024

 

 ·             Senior loan to Grange Backup Power Ltd for €15.2 million. The borrower is an
               Irish power asset linked to a data centre. The YTM on this loan is 9.01%

 ·             Senior loan to Project Hero for €40 million. The borrower is a Spanish
               market leader in land-based healthcare transport services. The YTM on this
               loan is 7.19%.

 ·             Purchased additional €2.0 million of Techem bonds during December 2024 (the
               overall position on this loan is for €10.1m). Techem is a leading provider
               of energy services headquartered in Eschborn, Germany.  The yield presents a
               premium of around ~210bps over comparable Euro B corporate credit. Techem Term
               Loan B is rated B1 by Moody's, B+ by S&P, and B by Fitch - all with Stable
               Outlook.

 

Investments that repaid during December 2024

 

 ·             SEQI received a full repayment from two of its three positions on Project
               Sienna for £6 million in total. The borrower is a leading wood biomass fuel
               supplier based in the UK. SEQI's remaining position on this loan is for £50
               million. The YTM is 10.05%

 

 

Non-performing loans

 

There are no updates on the remaining non-performing loans in the portfolio.

 

 

 

 

 

Top Holdings

 

 

Valuations are independently reviewed each month by PWC.

 

Full list of SEQI's Portfolio Holdings and SEQI Monthly Factsheet

http://www.rns-pdf.londonstockexchange.com/rns/4836T_2-2025-1-15.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/4836T_2-2025-1-15.pdf)

http://www.rns-pdf.londonstockexchange.com/rns/4836T_1-2025-1-15.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/4836T_1-2025-1-15.pdf)

 

 

About Sequoia Economic Infrastructure Income Fund Limited

 

 ·             SEQI is the UK's largest listed debt investor, investing 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 seeks to provide investors with regular, sustained, long-term income with
               opportunity for NAV upside from its well diversified portfolio. Investments
               are typically non-cyclical, in industries that provide essential public
               services or in evolving sectors such as energy transition, digitalisation or
               healthcare.
 ·             Since its launch in 2015, SEQI has provided investors with nine years of
               quarterly income, consistently meeting its annual dividend per share target,
               which has grown from 5p in 2015 to 6.875p per share in 2023.
 ·             The fund has a comprehensive ESG programme combining proprietary ESG goals,
               processes and metrics with alignment to key global initiatives
 ·             SEQI is advised by Sequoia Investment Management Company Limited (SIMCo), a
               long-standing investment advisory team with extensive infrastructure debt
               origination, analysis, structuring and execution experience.
 ·             SEQI's monthly updates are available here: Monthly Updates -
               seqi.fund/investors/monthly-updates
               (https://www.seqi.fund/investors/monthly-updates/)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For further information please contact:

 

 

 Investment Adviser                              +44 (0)20 7079 0480

 Sequoia Investment Management Company Limited   pm@seqimco.com (mailto:pm@seqimco.com)

 Steve Cook

 Dolf Kohnhorst

 Randall Sandstrom

 Anurag Gupta

 Matt Dimond

 Brokers                                         +44 (0)20 7029 8000

 Jefferies International Limited

 Gaudi Le Roux

 Harry Randall

 Public Relations                                +44 (0)20 7260 2700

 Teneo (Financial PR)                            sequoia@teneo.com (mailto:sequoia@teneo.com)

 Martin Pengelley

 Elizabeth Snow

 Faye Calow

 Administrator / Company Secretary               +44 (0) 20 3530 3107

 Sanne Fund Services (Guernsey) Limited          Admin.Sequoia@apexgroup.com (mailto:Admin.Sequoia@apexgroup.com)

 Matt Falla

 Shona Darling

 

 

 

 

 

 

 

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

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