Sequoia Econ Infra - NAV and Investment Update

Sequoia Economic Infrastructure Income Fund

14/11/2022 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221114:nRSN2200Ga&default-theme=true

RNS Number : 2200G  Sequoia Economic Infra Inc Fd Ld  14 November 2022

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

14(th) Nov 2022

Sequoia Economic Infrastructure Income Fund Limited

("SEQI" or the "Company")

 

NAV update

The NAV for SEQI, the specialist investor in economic infrastructure debt,
increased to 92.14 pence per share from the prior month's NAV of 92.08, (being
the 30 September 2022 cum-income NAV of 93.64 less the dividend of 1.5625
pence per share declared in respect of the quarter ended September 2022),
representing an increase of 0.06 pence per share.

 

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

 

 

                                   pence per share
 September NAV                     93.64

 Interest income, net of expenses   0.53
 Asset valuations                  -0.70

 FX movements, net of hedges        0.22

 Dividends                         -1.56
 October NAV                       92.14

 

 

 

 

Portfolio update

 

As at 31 October, the Company had cash of £79.0m and had drawn £189.6m on
its £325m revolving credit facility. The Company also had undrawn
commitments on existing investments collectively valued at £77.2m.
The Company's invested portfolio consisted of 63 private debt investments and
6 infrastructure bonds across 8 sectors and 27 sub-sectors. It had an
annualised yield-to-maturity (or yield-to-worst in the case of callable
bonds) of 11.12% and a cash yield of 7.2%. The weighted average portfolio
life is approximately 3.8 years. Private debt investments represented 98% of
the total portfolio and 58% of the portfolio comprised floating rate assets.

 

The Company's invested portfolio remains geographically diverse with
54% located across the US, 22% in the UK, 23% in Europe, and 1%
in Australia/New Zealand. 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.

 

Over recent months reductions in asset values have been primarily due to
increases in risk-free rates and credit spreads. The rise in risk-free rate
adjustments has also increased the yield-to-maturity of floating rate
investments and reduced the clean price of fixed rate assets (which also
increases the yield-to-maturity). Investors are reminded that these declines
are unrealised mark-to-market adjustments that should reverse over time as the
investments approach their repayment date (the "pull-to-par").

 

The Investment Adviser expects the Company's dividend cover to improve
materially for the 2023 financial year as the portfolio's floating rate
investments (representing 58% of the portfolio) continue to benefit from
increasing short term interest rates.

 

The following investments settled in October (excluding small loan drawings of
less than $0.5m):

 

• An additional Senior loan for PLN 22.3m (equivalent to £4.0m) to Green
Genius to finance the construction of solar PV projects in Poland.

 

The following assets sold or prepaid in October:

 

• A full sale of Heritage Power bonds for $16.4m, a holding company that
owns a portfolio of 16 power plants located across Pennsylvania, Ohio, and New
Jersey;

• A full sale of Embarq Corporation bonds for $13.7m, the third largest
telecom operator in the U.S.; and

• A full sale of Inmarsat bonds for $10.0m, the largest UK satellite
communications company.

 

There has been good progress over the past month in relation to the Company's
non-performing loans:

 

• 4000 Connecticut Avenue (formerly Whittle School): the borrower has
continued the execution of its strategy for the property and the value of this
loan has remained unchanged this month.

 

 • Bulb Energy: on 28 October 2022 the administrators of Bulb Energy
Limited (Bulb) entered into a sale transaction that will move Bulb's customers
to Octopus Energy. As has previously been disclosed to investors, Bulb is in a
special administration regime (SAR), during which the Company has been
prevented from enforcing its senior security over the assets of Bulb.
Moreover, during the SAR, Bulb has remained loss-making and has needed
Government funding to continue to provide electricity and gas to its
customers. Administrators' expectation is that the overall financial effect of
the sale will result in significant funds being paid to the purchaser for
taking on (presently) loss making customers, and that to the extent that there
are any proceeds from the sale of Bulb's customers, these will be used to
repay in part the funding that the Government has provided to Bulb and
(subject to potential legal challenges) not to repay the Company's senior
debt.

Following the sale, Octopus is expected to continue to use the Bulb brand name
and IT systems, both of which are owned by Simple Energy, for an interim
period. Simple Energy is the parent of Bulb and is a guarantor of the
Company's loan. The fees payable in the future by Octopus for the brand name
and IT systems, together with Simple's other assets, will provide a further
recovery for the Company on its loan to Bulb. To date, the Company has
received £14.0 million from Simple Energy. The mark on the Bulb loan has
fallen slightly this month, driven by minor changes to the assumptions made
with regards to the timing of future recoveries.

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 (%)

 AP Wireless US Holdco     USD       Private  HoldCo   62.1            TMT               Telecom towers       6.32                    9.67
 Project Tyre              USD       Private  Senior   61.0            Transport assets  Specialist shipping  8.26                    8.26
 Bannister Senior Secured  GBP       Private  Senior   59.9            Accommodation     Health care          10.11                   12.04
 Tracy Hills TL 2025       USD       Private  Senior   59.8            Other             Residential infra    11.12                   11.12
 Montreux HoldCo Facility  GBP       Private  HoldCo   57.4            Accommodation     Health care          12.21                   12.39
 GenOn Bowline Senior      USD       Private  Senior   57.3            Power             Energy transition    9.30                    9.29
 Hawkeye Solar HoldCo      USD       Private  HoldCo   56.5            Renewables        Solar & wind         9.23                    10.32
 AP Wireless Junior        EUR       Private  Mezz     55.7            TMT               Telecom towers       6.98                    8.49
 Expedient Data Centers    USD       Private  Senior   54.5            TMT               Data centers         9.33                    10.11
 Infinis Energy            GBP       Private  Senior   53.5            Renewables        Landfill gas         6.07                    7.70
 EIF Van Hook TL B 2024    USD       Private  Senior   53.5            Utility           Midstream            9.43                    11.00
 Madrid Metro              EUR       Private  HoldCo   51.0            Transport assets  Rolling stock        1.43                    7.77
 Workdry                   GBP       Private  Senior   50.0            Utility           Utility Services     5.69                    5.69
 Sacramento Data Centre    USD       Private  Senior   48.1            TMT               Data centers         7.68                    9.08
 Brightline                USD       Private  Senior   47.5            Transport         Rail                 8.81                    10.33

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

 

Sanne Fund Services Guernsey Limited

(Company Secretary)
                              +44 (0) 1481 755530

Matt Falla

Shona
Darling

 

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.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  MSCFFUFSDEESESF