REG - Sequoia Econ Infra - NAV and Investment Update

Sequoia Economic Infrastructure Income FundAnnouncement

17/03/2025 09:00

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RNS Number : 9224A  Sequoia Economic Infra Inc Fd Ld  17 March 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 - February 2025

 

The NAV per share for SEQI, the largest LSE listed infrastructure debt fund,
decreased to 93.95 pence per share from the prior month's NAV per share of
94.19 pence, representing a decrease of 0.24 pence per share.

 

                                        pence per share
 31 January NAV                         94.19
 Interest income, net of expenses                0.71
 Asset valuations, net of FX movements          -1.00
 Subscriptions / share buybacks                  0.05
 28 February NAV                        93.95

 

The decline in the Company's asset valuations during February 2025 was
primarily due to adjustments to the assumptions made in relation to the
recovery of non-performing loans, these are discussed below. The portfolio
pull-to-par, which is incremental to NAV as loans mature, is 3.6 pence per
share as of February 2025.

 

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; 56.9% of portfolio is in
fixed rate investments as of February 2025.

 

 

Market Summary - February 2025

 

Tariff Impact & Geopolitical Analysis

 

 ·             The announcement and implementation of a range of tariffs between the U.S. and
               other jurisdictions have led to increased volatility in global financial
               markets, particularly as trade tensions continue to unfold. The Investment
               Adviser expects long-term tariffs to risk global growth and to add some
               inflationary pressures in the U.S., U.K. and Eurozone.

 ·             As of February 2025, 55.1% of the portfolio is invested in defensive sectors
               (renewables, digitalisation, utilities and accommodation). The Company's
               investments in defensive sectors make it well-positioned to withstand economic
               downturns and inflationary pressures. The Investment Adviser will also
               continue to monitor geopolitical developments closely and remains cognisant of
               the emerging risks in this area and will respond as and when the situation
               becomes clearer.

 

 

Interest rate announcements and inflation data

 

 ·             On 6 February 2025, The Bank of England ("the BoE") cut interest rates by
               0.25% to 4.50%. On 6 March 2025, the European Central Bank ("the ECB") also
               reduced rates by 0.25% to 2.50%, while the Federal Reserve ("the Fed") has
               held rates steady at 4.75% since it reduced them by 0.25% on 18 December 2024.
               During March 2025, a U.S. market sell-off, driven by recession fears and trade
               tensions, has fuelled speculation about further rate cuts. The Fed has not
               signalled immediate plans to cut interest rates during the next meeting on 18
               March 2025, but markets have priced in three additional rate cuts by the end
               of 2025.

 ·             5-year bond yields remained stable in the Eurozone (2.12%) and U.K. (4.21%)
               during February 2025, as rate cuts were already priced in. In the U.S., yields
               fell by approximately 0.3% to 4.02% during the same period, driven by trade
               uncertainties and global growth concerns. Following the month, the Investment
               Adviser observed a steep increase in German government bond yields by
               approximately 0.4%, reflecting a sell-off in German bonds amid debt supply
               concerns and inflationary pressures. U.K Gilts have also trended upwards
               following month-end.

 ·             CPI inflation eased to 2.8% in the U.S. during February 2025, down from 3.0%
               in January 2025, while U.K. inflation rose to 3.0% in January 2025, up from
               2.5% in December 2024 (primarily due to higher transport costs). Eurozone
               inflation fell to 2.4% from 2.5% during the same period, nearing the ECB's
               target. Despite short-term pressures from tariffs, a downward trend in
               inflation is expected by late 2025.

 ·             As inflation gradually abates over time, the likelihood of future interest
               rate cuts rises, making 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 - February 2025

 

Revolving Credit Facility and cash holdings

 

 ·             As of February 2025, the Company had drawn £39.3 million on its revolving
               credit facility (RCF) of £300.0 million and had cash of £36.7 million
               (inclusive of interest income), and undrawn investment commitments of £147.9
               million. The Company's pipeline of opportunities remains strong and further
               updates will be provided to shareholders once more investments are made during
               the next quarter.

 

Portfolio Composition

 

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

 ·             60.2% 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 9.70% and a cash yield of 7.32% (excluding deposit
               accounts).

 ·             The weighted average portfolio life decreased marginally to 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 90.7% of the total portfolio, allowing
               the Company to capture illiquidity yield premiums.

 ·             The Company's invested portfolio currently consists of 43.1% floating rate
               investments and remains geographically diversified with 48.0% located across
               the U.S, 24.6% in the U.K., 27.3% in Europe, and 0.1% in Australia/New
               Zealand.

 

Portfolio highly diversified by sector and size

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share buybacks

 

 ·             The Company bought back 4,778,924 of its ordinary shares at an average
               purchase price of 77.37 pence per share in February 2025.

 ·             The Company first started buying back shares in July 2022 and has bought back
               209,718,341 ordinary shares as of 28 February 2025, with the buyback
               continuing into March 2025. This share repurchase activity by the Company
               continues to contribute positively to NAV accretion.

 

New investment activity during February 2025

 

 ·             During the month, the Company invested $50.0 million into Project Volt, a
               telecommunications company that provides broadband connectivity services in
               the South-Central U.S. to residential customers and small- and medium-sized
               businesses. The borrower intends to expand its last-mile fibre network using
               these loan proceeds. The loan has a floating-rate yield of 9.05% as of
               February 2025.

 

No investments repaid during February 2025

 

Non-performing loans

 

The Company continues to work towards maximising recovery from the
non-performing loans in the portfolio (equal to 3.5% of NAV):

 

 ·             The Company has started legal proceedings on an asset equal to 0.6% of NAV
               which is now being classed as non-performing. The markdown on this loan during
               February 2025 represents an overall decline of 0.24 pence per share. The loan
               is backed by a recently revalued asset and is marked in line with a
               conservative estimate of a recovery backed by that asset. The Company is not
               disclosing the Loan's identity due to commercial reasons.

 ·             The Company has received notice that its small residual exposure to the Salt
               Lake loan (equal to 0.1% of NAV) is scheduled to be substantially repaid in
               March 2025.

 ·             The Investment Adviser continues to work closely with the 4000 Connecticut
               borrower and other lenders to facilitate the re-leasing of the property (and
               also explore other potential ways of realising value). The carrying value of
               the loan currently equals 1.6% of NAV and the markdown on this loan during
               February 2025 represents an overall decline of 0.85 pence per share.

 

 

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/9224A_1-2025-3-17.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/9224A_1-2025-3-17.pdf)

http://www.rns-pdf.londonstockexchange.com/rns/9224A_2-2025-3-17.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/9224A_2-2025-3-17.pdf)

 

About Sequoia Economic Infrastructure Income Fund Limited

 

 ·             SEQI is the U.K.'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

 J.P. Morgan Cazenove (Joint Corporate Broker & Financial Adviser)      +44 (0)20 7742  4000

 Jérémie Birnbaum

 William Simmonds

 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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