Sequoia Econ Infra - NAV and Investment Update

Sequoia Economic Infrastructure Income Fund

14/12/2022 07:00

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RNS Number : 6097J  Sequoia Economic Infra Inc Fd Ld  14 December 2022

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

14(th) Dec 2022

Sequoia Economic Infrastructure Income Fund Limited

("SEQI" or the "Company")

Increased dividend target

 

In November 2022, the annualised target dividend increased by 10% from 6.25p
to 6.875p per share, with effect from the current (3rd) quarter of the 2023
financial year. The quarterly dividend with respect to the third quarter of
the 2023 financial year is expected to be declared in January 2023.

 

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 59% of the portfolio) continue to benefit from
increasing short term interest rates.

 

NAV update

The NAV per share for SEQI, the specialist investor in economic infrastructure
debt, increased to 93.25 pence per share from the prior month's NAV per share
of 92.14 pence per share, representing an increase of 1.11 pence per share.

 

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

 

 

                                   pence per share
 October NAV                       92.14
 Interest income, net of expenses  0.49
 Asset valuations                  1.11

 FX movements, net of hedges                -0.49
 November NAV                      93.25

 

 

Portfolio update

 

As at 30 November, the Company had cash of £39.5m and had drawn £165.2m on
its £325.0m revolving credit facility. The Company also had undrawn
commitments on existing investments collectively valued at £66.9m.
The Company's invested portfolio consisted of 62 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 11.0% and a cash yield of 7.1%. The weighted average portfolio life
is approximately 3.7 years. Private debt investments represented 98% of the
total portfolio and 59% of the portfolio comprised floating rate assets.

 

The Company's invested portfolio remains geographically diverse with
52.6% located across the US, 23.1% in the UK, 24.1% in Europe, and 0.2%
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 have 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" effect).

 

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

 

• An additional loan for $11.6m to Sunrun Safe Harbor HoldCo, a US-based
manufacturer of solar energy equipment;

• An additional loan for £5.8m to Clyde Street, a hotel construction
project in Scotland; and

• An additional Senior loan for PLN 13.3m (equivalent to $3.0m) to Green
Genius to finance the construction of solar PV projects in Poland.

 

The following investments sold or prepaid in November:

 

• A full sale of Bluewater Holding BV's 10% 2023 bonds for $16.6m, a
midstream oil and gas processing, storage, and offloading facility in Norway;

• A full sale of American Tanker (AMSC) 2025 bonds for $11.9m, a US-based
tanker company;

• A partial sale for $8.4m of Brightline 2028 bonds, a privately owned
passenger rail project in Florida; and

• A partial sale for $4.6m of Windstream 2027 bonds, a high-speed Broadband
provider in the USA.

 

On average, the new investments have a higher ESG Score than those disposed of
during the month.

 

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 re-capitalisation strategy for the property and
the value of this loan has remained unchanged this month.

 

 • Bulb Energy: the Investment Adviser continues with its strategy of
achieving value from Bulb Energy and its parent, Simple Energy. To date, SEQI
has received £14.0 million of repayments from Simple Energy. The mark on the
Bulb loan has remained unchanged this month.

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 (%)
 Bannister Senior     GBP       Private  Senior   60.3            Accommodation     Health care          10.03                   11.76
 AP Wireless US       USD       Private  HoldCo   60.0            TMT               Telecom towers       6.28                    9.40
 Project Tyre         USD       Private  Senior   58.6            Transport assets  Specialist shipping  8.26                    8.26
 Tracy Hills TL 2025  USD       Private  Senior   57.4            Other             Residential infra    10.59                   10.59
 AP Wireless Junior   EUR       Private  Mezz     57.4            TMT               Telecom towers       6.78                    7.93
 Montreux HoldCo      GBP       Private  HoldCo   57.4            Accommodation     Health care          12.96                   13.14
 Hawkeye Solar        USD       Private  HoldCo   55.7            Renewables        Solar & wind         8.99                    9.84
 Infinis Energy       GBP       Private  Senior   55.2            Renewables        Landfill gas         5.89                    7.28
 GenOn Bowline        USD       Private  Senior   55.0            Power             Energy transition    9.30                    9.29
 Expedient Data       USD       Private  Senior   52.8            TMT               Data centers         9.25                    9.88
 Madrid Metro         EUR       Private  HoldCo   51.8            Transport assets  Rolling stock        1.41                    7.46
 EIF Van Hook TL      USD       Private  Senior   51.0            Utility           Midstream            9.48                    10.80
 Workdry              GBP       Private  Senior   50.0            Utility           Utility Services     5.69                    5.69
 Sacramento Data      USD       Private  Senior   47.3            TMT               Data centers         7.50                    8.57
 Lightspeed Fibre     GBP       Private  Senior   43.4            TMT               Broadband            7.05                    13.57

 

 

Note (1) - excluding accrued interest

 

Disclaimer: the dividend increase is a target and not a profit forecast

 

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.

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