Sequoia Econ Infra - Net Asset Value(s)

Sequoia Economic Infrastructure Income Fund

15/10/2024 07:00

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RNS Number : 1326I  Sequoia Economic Infra Inc Fd Ld  15 October 2024

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 - September 2024

 

The NAV per share for SEQI, the largest LSE listed infrastructure debt fund,
increased to 95.03 pence per share from the prior month's NAV per share of
94.46 pence, representing an increase of 0.57 pence per share.

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

 

                                        pence per share
 30 August NAV                           94.46
 Interest income, net of expenses                0.77
 Asset valuations, net of FX movements          -0.29
 Subscriptions / share buybacks                  0.09
 30 September NAV                        95.03

 

 

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.

 

The Investment Adviser is currently locking in higher interest rates; 62.3% of
portfolio is in fixed rate investments as of September 2024, and has
positioned 54.8% of the portfolio in Defensive sectors (Renewables,
Digitalisation, Utility and Accommodation).

 

Long-term outlook on inflation and base rates points towards a beneficial
tailwind to NAV: Abating inflation expected to provide a foundation for
steadier credit markets, as falling rates would typically increase asset
valuations.

 

Market Summary - September 2024

 

Interest rate announcements and inflation data

 

 ·             During September 2024, the Bank of England held interest rates at 5.00%, the
               US Federal Reserve ("the Fed") reduced interest rates by 0.5% from 5.50% to
               5.00% and the European Central Bank ("the ECB") reduced its rates by 0.25%
               from 3.75% to 3.50%

 ·             The most recent data on CPI inflation in the UK shows that it remained at 2.2%
               in the 12 months to August 2024, unchanged from July 2024. In the US, CPI
               inflation fell from 2.5% in August 2024 to 2.4% in September 2024. In the ECB,
               CPI inflation dropped from 2.2% in August 2024 to 1.8% in September 2024.

 ·             As inflation abates, the likelihood of future interest rate cuts increases,
               which makes alternative investments such as infrastructure more attractive
               when compared to liquid. The markets have also priced in at least one further
               rate cut between now and the end of the year across all three regions.

 ·             Once a downwards trend toward a lower interest rate environment unfolds, this
               will be supportive of fixed rate loans and bonds, as it will accelerate their
               pull-to-par (the portfolio pull-to-par is 3.4 pence per share as of September
               2024). Further, as short-term rates begin to fall, yield curves will become
               less inverted or turn positive again, supporting a bid for risk in the market.

 

 

 

 

 

Portfolio update - September 2024

 

Revolving Credit Facility and cash holdings

 

 ·             The Company has drawn £20.0 million on its revolving credit facility (RCF) of
               £300.0 million and currently has cash of £88.7 million (inclusive of
               interest income and RCF drawings), and undrawn investment commitments of
               £54.1 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 54 private debt investments and
               2 infrastructure bonds, diversified across 8 sectors and 29 sub-sectors.

 ·             58.5% of the portfolio comprised of senior secured loans.

 ·             It had an annualised yield-to-maturity (or yield-to-worst in the case of
               callable bonds) of 9.94% and a cash yield of 7.40% (excluding deposit
               accounts).

 ·             The weighted average portfolio life remains short and is approximately 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 94.4% of the total portfolio, allowing
               the Company to capture illiquidity yield premiums.

 ·             The Company's invested portfolio currently consists of 37.7% floating rate
               investments and remains geographically diversified with 47.5% located across
               the USA, 28.9% in the UK, 23.5% in Europe, and 0.1% in Australia/New Zealand.

 ·             The portfolio remains highly diversified by sector and size. The average loan
               represents approximately 1.6% of the total portfolio.

 ·             At month end, approximately 100% of the Company's NAV consisted of either
               Sterling assets or was hedged into Sterling. The Company has adequate
               liquidity to cover margin calls, if any, on its hedging book.

               Portfolio highly diversified by sector and size

 

 

 

 

 

 

 

 

 

 

 

 

Repayments during September 2024

 

 ·             A full repayment for $39.1 million from Generation Bridge Northeast LLC,
               owners of electric power generation facilities totalling more than 5,900 MW of
               installed capacity located in the USA.

 

There were no new investments (exceeding £0.5m) during September 2024

 

Share buybacks

 

 ·             The Company bought back 7,684,224 of its ordinary shares at an average
               purchase price of 80.00 pence per share in September 2024.

 ·             The Company first started buying back shares in July 2022 and has bought back
               192,022,513 ordinary shares as of 30 September 2024, with the buyback
               continuing into October 2024. This share repurchase activity by the Company
               continues to contribute positively to NAV accretion.

 

Non-performing loans

 

 ·             Over approximately the last two years, the Company has been the majority owner
               of Zoa, a software business spun out of Simple Energy (the parent of Bulb
               Energy) as part of the Company's ongoing efforts to recover the amounts lent
               to Bulb.

 ·             Zoa has now been sold to ENSEK, a SaaS platform wholly-owned by Centrica. The
               transaction was structured as a sale of Zoa's assets and liabilities - the
               overall value of the transaction, taking account of the residual net assets
               remaining at Zoa (which remains owned by the Company), was in excess of the
               book value of Zoa, thus delivering a modest uplift in the NAV.

 ·             The Company expects to be able provide investors with an update on further
               recoveries from Bulb in the coming months.

 ·             There are no other significant changes to the book value of the non-performing
               loans as of 30 September. We will continue to provide updates to shareholders
               on a monthly basis.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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/1326I_1-2024-10-14.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/1326I_1-2024-10-14.pdf)

http://www.rns-pdf.londonstockexchange.com/rns/1326I_2-2024-10-14.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/1326I_2-2024-10-14.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 eight 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, cash-covered with
               an average annual dividend growth of over 4%.
 ·             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
               (http://WWW.SEQI.FUND)

 

 

 

 

 

 

 

 

 

 

 

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

 Stuart Klein

 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

 Sanne Fund Services (Guernsey) Limited          Admin.Sequoia@apexgroup.com (mailto:Admin.Sequoia@apexgroup.com)

 Matt Falla

 Shona Darling

 

 

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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