REG - Sequoia Econ Infra - NAV and Investment Update

Sequoia Economic Infrastructure Income FundAnnouncement

17/02/2025 07:00

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RNS Number : 2607X  Sequoia Economic Infra Inc Fd Ld  17 February 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 - January 2025

 

The NAV per share for SEQI, the largest LSE listed infrastructure debt fund,
increased to 94.19 pence per share from the prior month's NAV per share of
93.19 pence, (being the 31 December 2024 cum-income NAV of 94.91 less the
dividend of 1.71875 pence per share declared in respect of the quarter ended
31 December 2024 and payable on 28 February 2025), representing an increase of
1.00 pence per share.

 

                                        pence per share
 31 December NAV                        94.91
 Interest income, net of expenses                0.72
 Asset valuations, net of FX movements           0.24
 Subscriptions / share buybacks                  0.04
 Dividend                                       -1.72
 31 January NAV                         94.19

 

 

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 high interest rates; 59.0% of portfolio is in
fixed rate investments as of January 2025, and 52.7% of the portfolio is
invested in Defensive sectors (Renewables, Digitalisation, Utilities and
Accommodation).

 

 

Market Summary - January 2025

 

Tariff Impact & Geopolitical Analysis

 

 ·           On 3 February 2025, the US announced 25% tariffs on most goods imported from
             Mexico and Canada and 10% on Canadian energy, effective from 4 March 2025.
             They also announced tariffs on goods imported from China, which came into
             effect on 4 February 2025. China has retaliated with its own tariffs, which
             took effect on 10 February 2025. These include a 15% tariff on US coal and
             liquefied natural gas products, and a 10% tariff on crude oil, agricultural
             machinery and large engine cars. The EU and Canada have also vowed to take
             retaliatory measures immediately if the US imposes its tariffs next month.

 ·           While the immediate market reactions to President Trump's tariff proposals
             have been relatively muted, the Investment Adviser expects long-term tariffs
             to risk global growth and to add some inflationary pressures in the US, UK and
             Eurozone. The Investment Adviser is also following the geopolitical events
             closely and remains cognisant of the emerging risks in this area and will
             respond as and when the situation becomes clearer.

 

Interest rate announcements, inflation data and asset valuations

 

 ·           Economic indicators across all three regions point to slow but steady growth,
             with inflation moderating but still above central bank targets.

 ·           During January 2025, The European Central Bank ("the ECB") reduced interest
             rates by 0.25% to 2.75% in a widely expected move, which marks the fourth
             consecutive rate cut in the Eurozone. The Federal Reserve ("the Fed") kept
             rates steady at 4.50% during its January 2025 meeting, pausing its
             rate-cutting cycle after three consecutive reductions in 2024 that totalled a
             full percentage point. The Bank of England ("the BoE") made no changes to its
             policy rate during January 2025 but reduced it by a further 0.25% to 4.50% on
             6 February 2025, its lowest level for 18 months.

 ·           5-year government bond yields and credit spreads remained broadly flat during
             January 2025, as the rate cuts by the BoE and the ECB were largely anticipated
             by financial markets and therefore priced in, minimizing the immediate impact
             on bond yields. Geopolitical risks and concerns about global economic growth
             also supported demand for government bonds, keeping their yields stable.

 ·           The valuation of most of SEQI's fixed rate instruments increased during the
             month as the impact of a marginal increase in base rates was more than offset
             by the pull-to-par effect. The portfolio pull-to-par, which is incremental to
             NAV as loans mature, is 3.8 pence per share as of January 2025.

 ·           The Investment Adviser expects inflation to ease during 2025 as energy prices
             stabilize and supply chains improve. Although President Trump's tariffs could
             introduce inflationary pressures in the short-term, a downward trend toward a
             lower interest rate environment is expected to prevail over time, which is
             supportive of current fixed-rate loans and bond positions.

 ·           As inflation gradually abates in the long run, the likelihood of future
             interest rate cuts increases (although slightly more hawkish in the US), 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 - January 2025

 

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 £60.6 million (inclusive of interest
             income), and undrawn investment commitments of £137.7 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 53 private debt investments and
             5 infrastructure bonds, diversified across 8 sectors and 30 sub-sectors.

 ·           59.3% 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 9.73% and a cash yield of 7.21% (excluding deposit
             accounts).

 ·           The weighted average portfolio life decreased marginally to 3.4 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 90.3% of the total portfolio, allowing
             the Company to capture illiquidity yield premiums.

 ·           The Company's invested portfolio currently consists of 41.0% floating rate
             investments and remains geographically diversified with 47.2% located across
             the USA, 24.6% in the UK, 28.1% in Europe, and 0.1% in Australia/New Zealand.

 

 

 

Portfolio highly diversified by sector and size

 

 

 

 

 

 

 

 

Share buybacks

 

 ·           The Company bought back 3,637,250 of its ordinary shares at an average
             purchase price of 78.20 pence per share in January 2025.

 ·           The Company first started buying back shares in July 2022 and has bought back
             204,939,417 ordinary shares as of 31 January 2025, with the buyback continuing
             into February 2025. This share repurchase activity by the Company continues to
             contribute positively to NAV accretion.

 

New investment activity during January 2025

 

 ·           Senior loan to Grange Backup Power Ltd for €11.9 million. The borrower is an
             Irish power asset linked to a data centre. The YTM on this loan is 9.02%.

 ·           One additional loan to Tracy Hills Holdings Company LLC Facility B for $5.0
             million to finance the separate revolving credit facility. Tracy Hills is a
             residential infrastructure project in California. The YTM on this loan is
             10.86%.

 

No investments repaid during January 2025

 

 

Non-performing loans

 

 ·           The 4000 Connecticut loan (formerly Whittle Schools) is currently classified
             as non-performing and is under active monitoring. Since the borrower gained
             vacant possession of the property in late 2023, the Investment Adviser has
             been working closely with the borrower and other lenders to facilitate the
             re-leasing of the property. To support these efforts, the lenders agreed to an
             extension of the loan, which was originally set to mature in February 2025.
             Since then, the lenders have maintained active engagement with the borrower
             regarding the re-leasing process and are evaluating several strategic options
             for the loan. These options include, but are not limited to, extending the
             loan tenor further, selling the loan, or pursuing foreclosure. We are actively
             monitoring the valuation and will provide further updates as progress is made.

 

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/2607X_2-2025-2-16.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/2607X_2-2025-2-16.pdf)

http://www.rns-pdf.londonstockexchange.com/rns/2607X_1-2025-2-16.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/2607X_1-2025-2-16.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

 Apex Fund and Corporate Services (Guernsey) Limited   Admin.Sequoia@apexgroup.com (mailto:Admin.Sequoia@apexgroup.com)

 

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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