REG - Sequoia Econ Infra - NAV and Investment Update

Sequoia Economic Infrastructure Income FundAnnouncement

15/04/2025 07:02

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RNS Number : 9897E  Sequoia Economic Infra Inc Fd Ld  15 April 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 - March 2025

 

The NAV per share for SEQI, the largest LSE listed infrastructure debt fund,
decreased to 92.55 pence per share from the prior month's NAV per share of
93.95 pence, representing a decrease of 1.40 pence per share.

 

                                        pence per share
 28 February NAV                        93.95
 Interest income, net of expenses                0.75
 Asset valuations, net of FX movements          -2.18
 Subscriptions / share buybacks                  0.03
 31 March NAV                                   92.55

 

The decline in the Company's asset valuations during March 2025 was primarily
due to adjustments to the assumptions made in relation to the recovery of a
non-performing loan, this is discussed below. The portfolio pull-to-par, which
is incremental to NAV as loans mature, has increased from 3.6 last month to
4.0 pence per share as of March 2025.

 

No expected material FX gains or losses as the portfolio is approximately 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; 59.4% of portfolio is in
fixed rate investments as of March 2025.

 

Market Summary - March 2025

 

Tariff Impact & Geopolitical Analysis

 

 ·             Recent tariff measures and trade policy shifts between the U.S. and the rest
               of the world have renewed volatility in international financial markets. With
               these geopolitical frictions and protectionist strategies back in focus, the
               Investment Adviser believes prolonged tariffs could pose a drag on global
               economic momentum and fuel inflationary pressures across the U.S., U.K., and
               Eurozone.

 ·             As of March 2025, 54.7% 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 remains cognisant
               of the emerging geopolitical risks and continues to monitor developments
               closely.

 

 

Interest Rate Announcements and Inflation Data

 

 ·             During March, the Federal Reserve and the Bank of England both held rates at
               4.75% and 4.50%, respectively, while the European Central Bank reduced
               interest rates by 0.25% to 2.50%. Due to the ongoing sell-off in the financial
               markets, analysts expect central banks to ease monetary policy by reducing
               interest rates more than previously expected, with bond futures pricing in the
               likelihood of at least four more rate cuts by the Federal Reserve before the
               end of the year.

 ·             As of March 2025, the yield on 10-year U.S. Treasuries remained stable around
               4.2% whilst yields on 10-year U.K. Gilts and German Bund trended up by 0.2%
               and 0.4%, to 4.7% and 2.7%, respectively. As such, the valuation of most of
               the Company's fixed rate instruments decreased during the month due to
               increases in base rates and credit spreads. Following month-end, U.S. Treasury
               yields have shown increased volatility, mainly due to the ongoing trade war
               between the U.S. and China.

 ·             In the U.S., CPI inflation declined to 2.4% in March, from 2.8% in February.
               In the Eurozone, CPI inflation declined to 2.2% during March, from 2.3% in
               February. In the U.K., the most recent data on CPI inflation shows that it
               eased to 2.8% during February, from 3.0% in January.

 ·             The recent implementation of broad-based import tariffs is expected to have a
               short-term impact on inflation. While the immediate effect may be an uptick on
               consumer prices due to higher costs for imported goods, these pressures are
               likely to be temporary. Supply chains are likely to adjust over time, with
               businesses seeking alternative sources or passing on only partial cost
               increases.

 ·             As inflation gradually abates over time, the likelihood of future interest
               rate cuts increases, 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 - March 2025

 

Revolving Credit Facility and Cash Holdings

 

 ·             As of March 2025, the Company had drawn £56.9 million on its revolving credit
               facility (RCF) of £300.0 million and had cash of £34.9 million (inclusive of
               interest income), and undrawn investment commitments of £130.4 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.

 ·             59.9% 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 9.87% and a cash yield of 7.29% (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 90.8% of the total portfolio, allowing
               the Company to capture illiquidity yield premiums.

 ·             The Company's invested portfolio currently consists of 40.6% floating rate
               investments and remains geographically diversified with 45.8% located across
               the U.S., 25.4% in the U.K. and 28.8% in Europe.

 

Portfolio Highly Diversified by Sector and Size

 

 

 

 

 

 

 

Share Buybacks

 

 ·             The Company bought back 3,458,721 of its ordinary shares at an average
               purchase price of 77.24 pence per share in March 2025.

 ·             The Company first started buying back shares in July 2022 and has bought back
               213,177,062 ordinary shares as of 31 March 2025, with the buyback continuing
               into April 2025. This share repurchase activity by the Company continues to
               contribute positively to NAV accretion.

 

New Investment Activity During March 2025

 

 ·             A senior holdco loan facility for €14.4 million to Project Crystal Floating,
               a market leader in providing diagnostic imaging and radiotherapy services
               delivered via numerous operating clinics across Germany. The business is
               underpinned by a stable regulatory environment, the essentiality of such
               services in delivering high quality medical care and strong barriers to entry;

 ·             An additional senior loan for $18.5 million to Project Ocean II for the
               financing of a minority stake in the Floating Liquified Natural Gas ("FLNG")
               asset; and

 ·             An additional €2.4 million of Exeltium S.A.S 9.4%12/2031 bonds, a utility
               services company that trades and distributes electricity to consumers in
               France.

 

Investments Repaid During March 2025

 

 ·             The Company received the final scheduled repayment from Salt Lake Potash,
               together with some small additional distributions, for a total of A$2.8
               million (or £1.3 million).

 

Non-performing Loans

 

The Company continues to work towards maximising recovery from the
non-performing loans in the portfolio (equal to 2.3% of NAV):

 

 ·      A loan that is collateralized by a landmark US educational
 building was adversely impacted by government cuts which reduced the
 likelihood of finding new tenants. In March 2025, the Department of Government
 Efficiency (DOGE), under the leadership of Elon Musk within the Trump
 administration, announced plans to reduce the U.S. Department of Education's
 workforce by approximately 50%, affecting around 2,200 employees. This
 development has had a material adverse impact on leasing negotiations with
 prospective tenants, as discussions with the borrower were paused, resulting
 in a delay to the anticipated lease-up timeline. The carrying value of the
 loan currently equals 0.4% of NAV and the markdown on this loan during March
 2025 represents an overall decline of 1.3 pence per share.

 

There are no further updates on the Company's non-performing loans.

 

 

Top Holdings

 

 

 

Valuations are independently reviewed each month by PWC.

 

http://www.rns-pdf.londonstockexchange.com/rns/9897E_1-2025-4-14.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/9897E_1-2025-4-14.pdf)

http://www.rns-pdf.londonstockexchange.com/rns/9897E_2-2025-4-14.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/9897E_2-2025-4-14.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

 Alternative Investment Fund Manager (AIFM)                             +44 ( (tel:+44%2020%203530%203626) 0) (tel:+44%2020%203530%203626) 20 35303

                                                                       626 (tel:+44%2020%203530%203626)
 FundRock Management Company (Guernsey) Limited

 Dave Taylor

+44 ( (tel:+44%2020%203530%203626) 0) (tel:+44%2020%203530%203626) 20 35303
 Chris Hickling                                                         626 (tel:+44%2020%203530%203626)

+44 ( (tel:+44%2020%203530%203626) 0) (tel:+44%2020%203530%203626) 20 35303
                                                                        626 (tel:+44%2020%203530%203626)

sequoia-aifm@fundrock.com (mailto:sequoia-aifm@fundrock.com)
 Administrator / Company Secretary                                      +44 (0)20 3530 3107

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

 +44 ( (tel:+44%2020%203530%203626) 0) (tel:+44%2020%203530%203626) 20 35303
 626 (tel:+44%2020%203530%203626)

sequoia-aifm@fundrock.com (mailto:sequoia-aifm@fundrock.com)

 

 

Administrator / Company Secretary

Apex Fund and Corporate Services (Guernsey) Limited

 

 

 

 

 

 

 

 

 

 

 

+44 (0)20 3530 3107

Admin.Sequoia@apexgroup.com (mailto:Admin.Sequoia@apexgroup.com)

 

 

 

 

 

 

 

 

 

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