Sequoia Economic Infra Inc Fd Ld Publication of Circular (0728E)

TIDMSEQI

RNS Number : 0728E

Sequoia Economic Infra Inc Fd Ld

03 May 2017

THIS ANNOUNCEMENT IS NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES (INCLUDING TO U.S. PERSONS, AS SUCH TERM IS DEFINED UNDER REGULATION S OF THE U.S. SECURITIES ACT OF 1933, AS AMED, THE "SECURITIES ACT"), CANADA, AUSTRALIA, NEW ZEALAND, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

3 May 2017

Sequoia Economic Infrastructure Income Fund Limited (the "Company")

Publication of Circular

Ordinary Share Issue, Placing Programme and Proposed Amendment to the Investment Policy

Further to the earlier announcement by the Company and the publication of the Company's Prospectus, the Board announces that it has published a Circular in relation to the Company's proposed Ordinary Share Issue, Placing Programme and Amendment to the current Investment Policy.

On 24 April 2017, the Board announced that it was considering raising new capital in order to take advantage of the growing set of attractive investment opportunities accessible to the Company which would be to the benefit of existing investors. The Board values the support provided to it from its existing Shareholders and as such it intends to have a material element of pre-emption in the equity issue.

The Company has today announced that it intends to proceed with the Open Offer, Ordinary Share Placing and Offer for Subscription for a target size of GBP125 million at an Issue Price of 105.5 pence per Ordinary Share (the "Issue"). Under the terms of the Open Offer, up to approximately 119.2 million Ordinary Shares will be made available to existing Qualifying Shareholders on the basis of 1 new Ordinary Share for every 5 existing Ordinary Shares held. The Directors may, at their discretion, issue up to a maximum number of approximately 151.7 million Ordinary Shares pursuant to the Issue if the Directors, in consultation with the Investment Adviser and Stifel, believe that appropriate opportunities exist for the deployment of additional Issue proceeds, although there is no certainty that the maximum number of Ordinary Shares will be issued, even if sufficient investor demand exists. In the event that applications for the Ordinary Shares are in excess of the target amount, the Company may scale back applications made in such manner as it shall determine in its discretion (in consultation with Stifel).

The minimum size of net proceeds of the Issue for the Issue to proceed is GBP60 million. The Company will seek admission of the new Ordinary Shares to be issued under the Issue to the premium segment of the Official List and to trading on the Main Market. Further details of the Issue are included in the Prospectus.

The Company also intends to implement a Placing Programme of up to 200 million ordinary shares. The Placing Programme allows the Company the flexibility to raise further capital to take advantage of attractive opportunities should it wish to do so. The Placing Programme Shares will be issued at an issue price calculated by reference to the prevailing Net Asset Value per Ordinary Share at the time together with a premium intended to cover, at a minimum, the costs and expenses of the relevant placing of Ordinary Shares (including, without limitation, any placing commissions). It is the intention of the Directors, however, that no Placing Programme Shares will be issued prior to 85 per cent. of the proceeds of the Issue being invested or committed.

Benefits of the Issue

The Board believes that proceeding with the Issue will have the following benefits:

(A) provide the Company with additional capital to take advantage of the currently available pipeline of opportunities which should enable the Group to further diversify its existing portfolio;

(B) create the potential to enhance the NAV per Ordinary Share of existing Ordinary Shares through new share issuance at a premium to NAV per Ordinary Share, after the related costs have been deducted;

(C) grow the Company, thereby spreading the Company's fixed running costs across a wider base of shareholders, and benefiting from the reducing scale of charges for the Investment Adviser, thereby reducing the total expense ratio;

(D) a greater number of Ordinary Shares in issue and a wider base of shareholders is likely to improve liquidity in the market;

(E) increase the size of the Company which should help make the Company more attractive to a wider base of investors; and

(F) the availability of Ordinary Shares to new investors under the Ordinary Share Placing and Offer for Subscription, offers the prospect of a wider and more diversified shareholder base, and an increased opportunity to grow the Company with the benefits of scale and liquidity for existing Shareholders.

Benefits of the Placing Programme

The Directors believe that instituting the Placing Programme will:

(A) create the potential to enhance the NAV per Ordinary Share of existing Ordinary Shares through new share issuance at a premium to NAV per Ordinary Share, after the related costs have been deducted;

(B) grow the Company, thereby spreading operating costs over a larger capital base, and benefiting from the reducing scale of charges for the Investment Adviser, which should reduce the total expense ratio;

(C) partially satisfy market demand from time to time for Ordinary Shares and improve liquidity in the market for Ordinary Shares; and

(D) enable the Company to raise additional capital quickly, in order to take advantage of investment opportunities that have been identified and which may be identified in the future.

Related Party Transaction

To the extent that an existing Shareholder holds or, in the previous 12 months has held, Ordinary Shares representing 10 per cent. or more of the current issued share capital of the Company, such a Shareholder is considered a related party of the Company for the purposes of the Listing Rules. As a substantial shareholder of the Company, SEB Pensionsforsikring A/S (which holds 11.12 per cent. of the voting rights as at 2 May 2017) and/or any of its Associates is considered a Related Party. Whilst the Related Party has not yet agreed to participate in the Issue or the Placing Programme, in the event that the Related Party participates in the Ordinary Share Placing, Offer for Subscription and/or the Placing Programme its participation would be expected to be treated as a related party transaction for the purposes of the Listing Rules. Consequently, should the Related Party wish to participate in the Issue and/or the Placing Programme above certain amounts, its participation will be dependent upon the prior approval of the independent Shareholders of the Company.

Proposed Amendment to the Investment Policy

The Company is seeking approval from Shareholders to adopt an amended investment policy for the Company in order to (amongst other clarificatory changes) increase the jurisdictional diversification limit with respect to the United States from 50 per cent. to 60 per cent. of the Company's total assets.

The Investment Adviser is seeing a growing number of attractive opportunities in the U.S. due to a combination of macroeconomic and political factors. The immediate asset pipeline contains GBP100 million equivalent worth of North American investment opportunities. These projects are spread across Telecommunication, Media and Technology Infrastructure, Power and other infrastructure sectors of the Investment Policy. Currently, the Investment Adviser has limited the number of investments in the United States in the Company's pipeline due to the current 50 per cent. maximum constraint contained in the Investment Policy, and the Directors believe an increase to 60 per cent. would benefit the portfolio by allowing the Company to access a wider range of transactions, with attractive risk/return profiles.

This proposed change is considered to constitute a material change to the Company's published Investment Policy. Therefore, in accordance with Listing Rule 15.4.8R, the Company is required to obtain prior approval by Shareholders at the EGM.

Accordingly and in compliance with the Companies Law and the Listing Rules, the Board is seeking Shareholder approval in connection with certain matters relating to the proposed Issue and Placing Programme. An EGM of the Company is being convened at which Shareholders will be asked to:

(A) approve the potential Issue Related Party Transaction, that may arise with respect to the Related Party if it wishes to participate in the Ordinary Share Placing and/or Offer for Subscription ("Resolution 1");

(B) approve the potential Placing Programme Related Party Transaction/s which may arise with respect to the Related Party if it wishes to participate in the Placing Programme ("Resolution 2");

(C) approve the disapplication of pre-emption rights in respect of up to approximately 151.7 million Ordinary Shares for the purposes of the Issue and up to 200 million Ordinary Shares for the purposes of the Placing Programme ("Resolution 3");

(D) approve certain amendments to the existing Articles in order to provide the Board with the requisite authority to implement a scrip dividend programme should it choose to do so and if authorised by an ordinary resolution of the Company ("Resolution 4"); and

   (E)       approve the adoption of an amended investment policy for the Company ("Resolution 5"). 

The Resolutions

Issue Related Party Transaction (Resolution 1)

The approval of the Issue Related Party Transaction by Shareholders is required pursuant to Chapter 11 of the UK Listing Authority's Listing Rules. As a substantial shareholder of the Company, the Related Party is a related party for the purposes of the Listing Rules and the Board anticipates that it may potentially wish to subscribe for Ordinary Shares.

Therefore, any participation by the Related Party in the Ordinary Share Placing and/or Offer for Subscription would be treated as an Issue Related Party Transaction and would require the approval of independent Shareholders, to the extent that such participation breaches, in terms of size, certain specified thresholds under the Listing Rules.

Although the Related Party has not yet agreed to participate in the Issue, it is proposed that the Related Party will be able to subscribe for Ordinary Shares issued pursuant to the Ordinary Share Placing and/or Offer for Subscription, provided that their shareholding in the Company, in aggregate with any shareholding in the Company of any relevant concert parties (as defined in the City Code) following their individual participation in the Issue, represents no more than 29.99 per cent. of the issued share capital of the Company following Admission. Should the Related Party choose to participate in the Ordinary Share Placing and Offer for Subscription, its participation will be on the same terms as other subscribers (i.e. it shall pay 105.5 pence per Ordinary Share for which it subscribes). In the event that applications under the Ordinary Share Placing and/or Offer for Subscription cannot be satisfied in full, applications from the Related Party will be scaled back under the same methodology as is applicable to other investors in each of the Ordinary Share Placing and the Offer for Subscription. The participation by the Related Party in the Ordinary Share Placing and/or Offer for Subscription may dilute the percentage holding of an existing Shareholder to the extent that the existing Shareholder does not participate in the Issue.

The Directors believe that the approval of the Issue Related Party Transaction is beneficial to the overall Issue.

Shareholders will be asked to approve the Issue Related Party Transaction through Resolution 1, which is to be proposed as an ordinary resolution at the EGM.

The Company will ensure that the Related Party does not vote on Resolution 1, and will take all reasonable steps to ensure that the Related Party's Associates do not vote on Resolution 1.

The Issue is not conditional on the passing of Resolution 1.

If Resolution 1 is not passed, the Related Party may still participate in the Issue via the Open Offer. The Related Party will have the same pro rata entitlements as the other Shareholders to subscribe for Ordinary Shares under the terms of the Open Offer.

Placing Programme Related Party Transaction/s (Resolution 2)

The approval of the Placing Programme Related Party Transaction/s by Shareholders is required pursuant to Chapter 11 of the UK Listing Authority's Listing Rules. As a substantial shareholder of the Company, the Related Party is a related party for the purposes of the Listing Rules and the Board anticipates that it may potentially wish to subscribe for Placing Programme Shares.

Therefore, any participation by the Related Party in the Placing Programme would be treated as a Placing Programme Related Party Transaction/s and would require the approval of independent Shareholders, to the extent that such participation breaches, in terms of size, certain specified thresholds under the Listing Rules.

Although the Related Party has not yet agreed to participate in the Placing Programme, it is proposed that the Related Party will be able to subscribe for Ordinary Shares pursuant to the Placing Programme, provided that their shareholding in the Company, in aggregate with any shareholding in the Company of any relevant concert parties (as defined in the City Code) following their individual participation in the Issue and Placing Programme, represents no more than 29.99 per cent. of the issued share capital of the Company following the applicable Placing Programme Admission. Should the Related Party choose to participate in the Placing Programme, its participation will be on the same terms as other subscribers. The participation by the Related Party in the Placing Programme may dilute the percentage holding of an existing Shareholder to the extent that the existing Shareholder does not participate in the Placing Programme. Participation in the Placing Programme may be through one or multiple issues of Ordinary Shares.

The Directors believe that the approval of the Placing Programme Related Party Transaction/s is beneficial to the overall Placing Programme.

Shareholders will be asked to approve the Placing Programme Related Party Transaction/s through Resolution 2, which is to be proposed as an ordinary resolution at the EGM.

The Company will ensure that the Related Party does not vote on Resolution 2, and will take all reasonable steps to ensure that the Related Party's Associates do not vote on Resolution 2.

The Placing Programme is not conditional on the passing of Resolution 2.

Pre-emption rights (Resolution 3)

The Articles contain pre-emption rights in respect of the allotment or sale for cash of "equity securities" (which include Ordinary Shares or rights to subscribe for or to convert securities into Ordinary Shares), which can be disapplied by way of a special resolution. The pre-emption rights have been disapplied up to an aggregate amount not exceeding 10 per cent. of the Ordinary Shares from time to time in issue until the conclusion of the next annual general meeting of the Company in 2017 (the "General Disapplication"). The Directors intend to request that the General Disapplication is renewed at the next annual general meeting of the Company and, thereafter, at each general meeting of the Company. Resolution 3 proposes that the pre-emption rights are disapplied in accordance with the Articles in respect of up to 200 million Ordinary Shares to be issued pursuant to the Issue. Resolution 3 will not affect the General Disapplication.

Notwithstanding the disapplication of pre-emption rights, the Directors recognise the importance of existing Shareholders' protections and consequently the Issue is being structured to include a material element of pre-emption via the Open Offer on the basis of 1 new Ordinary Share for every 5 Ordinary Shares (which, if fully subscribed, would represent approximately 78.6 per cent. of the Ordinary Shares available under the Issue, assuming a maximum number of 151,658,768 Ordinary Shares are issued pursuant to the Issue).

Resolution 3 also proposes that the pre-emption rights are disapplied in accordance with the Articles in respect of up to 200 million Ordinary Shares for the purposes of the Placing Programme. To the extent that a Shareholder does not participate in any such issue of Ordinary Shares under the Placing Programme, their existing shareholding may be diluted. Where 151,658,768 Ordinary Shares are issued pursuant to the Issue (being the maximum number of Ordinary Shares available under the Issue) and 200 million Placing Programme Shares are issued pursuant to the Placing Programme (being the maximum number of Placing Programme Shares available under the Placing Programme), and the Shareholder does not participate in the Issue or the Placing Programme, there would be a dilution of approximately 37.1 per cent. in existing Shareholders' voting control of the Company.

The allotment of Placing Programme Shares is at the discretion of the Directors and may take place at any time prior to the final closing date of 2 May 2018. An announcement of each issue of Placing Programme Shares pursuant to the Placing Programme will be released through a Regulatory Information Service, including details of the number of Placing Programme Shares issued and the applicable Placing Programme price.

Amendments to Existing Articles (Resolution 4)

Resolution 4 will be proposed as a special resolution to make amendments to the existing Articles in order to provide the Board with the requisite authority to implement a scrip dividend programme should it choose to do so and if authorised by an ordinary resolution of the Company. To the extent that the Board decides to implement a scrip dividend programme, implementation will be notified to Shareholders in the future through the publication of an RIS and a separate scrip dividend circular. The proposed amendments to the Articles include provisions to determine the basis on which the entitlement to new shares pursuant to the scrip dividend is calculated, to make arrangements for the new shares to be paid up and to deal with fractional entitlements. The full text of the proposed amendments is set out in Resolution 4 in the notice of EGM.

Amendment to Investment Policy (Resolution 5)

Resolution 5 will be proposed as an ordinary resolution to approve the adoption of an amended Investment Policy for the Company in order to (amongst other clarificatory changes) increase the jurisdictional diversification limit with respect to the United States from 50 per cent. to 60 per cent. of the Company's total assets.

Shareholder resolutions

The proposed Issue and Placing Programme are only conditional upon, amongst other things, the Company obtaining Shareholders' approval of Resolution 3.

In order to be passed, the Resolutions to be proposed at the EGM will require:

-- in the case of Resolutions 1, 2 and 5 which are to be proposed as ordinary resolutions, the approval of Shareholders representing more than 50 per cent. of the votes cast at the EGM; and

-- in the case of Resolutions 3 and 4 which are to be proposed as special resolutions, the approval of Shareholders representing at least 75 per cent. of the votes cast at the EGM.

Copies of the Articles (including the existing Articles and a form of the Articles as amended pursuant to Resolution 4) and the monthly NAV announcements are available for inspection at: (i) the registered office of the Company at Sarnia House, Le Truchot, St Peter Port, Guernsey, GY1 1GR; and (ii) the offices of Jones Day at 21 Tudor Street, London, EC1V 8BR during normal business hours on any Business Day from the date of this document until the conclusion of the EGM, and at the place of the EGM for at least 15 minutes prior to, and during, the EGM

Expected EGM timetable

Latest time and date for receipt of forms of proxy 9.30 a.m. on 17 May 2017

Extraordinary General Meeting 9.30 a.m. on 19 May 2017

A copy of the Circular has been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.morningstar.co.uk/uk/nsm. A copy of the Circular is also available on the Company's website at http://www.seqifund.com/downloads.

Defined terms used in this announcement shall (unless the context otherwise requires) have the same meaning as set out in the Company's Circular and Prospectus dated 3 May 2017.

For further information please contact:

 
 Sequoia Investment Management 
  Company 
  Steve Cook 
  Dolf Kohnhorst 
  Randall Sandstrom 
  Greg Taylor                     [phone] 
 Stifel Nicolaus Europe 
  Limited 
  Neil Winward 
  Mark Bloomfield 
  Gaudi Le Roux                   [phone] 
 Praxis Fund Services 
  Limited (Company Secretary) 
  Shona Darling                   [phone] 
 

About the Company

Sequoia Economic Infrastructure Income Fund Limited is a Guernsey-incorporated closed-ended investment company whose Ordinary Shares are traded on the Main Market of the London Stock Exchange. The Company's investment objective is to provide its shareholders with regular, long-term distributions by generating exposure to senior and subordinated economic infrastructure debt and related and/or similar assets across a diversified range of jurisdictions, sectors and sub-sectors. The Company's Ordinary Shares were admitted to trading on the Main Market of the London Stock Exchange on 3 March 2015.

IMPORTANT NOTICES

Neither this announcement nor the information contained herein is for release, publication or distribution, directly or indirectly, in or into the United States, the Republic of South Africa, Canada, Australia, New Zealand or Japan or any other jurisdiction where to do so might constitute a violation of the relevant laws or regulations of such jurisdiction. The securities referred to herein have not been and will not be registered under the relevant securities laws of any such excluded territory.

This announcement does not contain, constitute or form part of an offer for sale of, resale of, transfer of or delivery of or the solicitation of an offer to purchase directly or indirectly, securities in the United States or to, or for the account or benefit of a U.S. Person (as defined in Regulation S of the Securities Act). The securities referred to herein have not been, and will not, be registered under the Securities Act or any other applicable securities laws of, or with any securities regulatory authority of, any state or other jurisdiction of the United States, and may not be offered, sold, resold, transferred or delivered, directly or indirectly, in the United States or to, or for the account or benefit of, any U.S. Person absent registration or an applicable exemption from the registration requirements of the Securities Act. The Company has not been and will not be registered under the U.S. Investment Company Act of 1940, as amended, and neither International Fund Management (the "Investment Manager") nor Sequoia Investment Management Company (the "Investment Adviser") will be registered as an investment adviser under the U.S. Investment Advisers Act of 1940, as amended. Consequently, investors will not be entitled to the benefits and protections of the U.S. Investment Company Act of 1940, as amended or the U.S. Investment Advisers Act of 1940, as amended. The shares of the Company will be offered and sold only to non-U.S. Persons outside the United States in reliance on Regulation S under the Securities Act. There will be no offer of the Company's securities in the United States. The distribution of this document may also be restricted by law in other jurisdictions.

This announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase or subscribe for any ordinary shares or any other securities nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract.

The distribution of this announcement may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

Subject to certain exceptions, the securities referred to herein may not be offered or sold in the United States, the Republic of South Africa, Canada, Australia, New Zealand or Japan or to, or for the account or benefit of, any national, resident or citizen of the United States, Canada, Japan, Australia, New Zealand or the Republic of South Africa. There will be no offer of the ordinary shares in the United States, Canada, the Republic of South Africa, Japan, Australia or New Zealand.

In member states of the European Economic Area (the "EEA"), this announcement is directed only at (a) persons who are "qualified investors" ("Qualified Investors"), being persons falling within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC) (as amended, including by Directive 2010/73/EU, to the extent such amendments have been implemented in the relevant Member State and including any relevant implementing measure in the relevant Member State); (b) in the United Kingdom, Qualified Investors who are persons who (i) fall within article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"); (ii) fall within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations, etc") of the Order; or (iii) are persons to whom it may otherwise be lawfully communicated (all such persons together being referred to as "Relevant Persons"). This announcement must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to which this announcement relates is available only to Relevant Persons and will be engaged in only with Relevant Persons.

Stifel Nicolaus Europe Limited ("Stifel"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for the Company and no one else in connection with the potential equity issue. Stifel will not regard any other person as its client in relation to the potential issue and will not be responsible to anyone other than the Company for providing the protections afforded to its clients, nor for providing advice in relation to the potential issue, the contents of this announcement or any transaction, arrangement or other matter referred to herein.

Neither Stifel nor any of its directors, officers, employees, advisers, affiliates or agents accepts any responsibility or liability whatsoever for/or makes any representation or warranty, express or implied, as to the truth, accuracy or completeness of the information in this announcement (or whether any information has been omitted from the announcement) or any other information relating to the Company or its subsidiary, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of the announcement or its contents or otherwise arising in connection therewith.

The Company is incorporated in Guernsey and has been registered as a registered closed-ended collective investment scheme under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended. It is suitable only for professional or experienced investors, or those who have taken appropriate professional advice.

Regulatory requirements which may be deemed necessary for the protection of retail or inexperienced investors, do not apply to listed funds. By investing in the Company you will be deemed to be acknowledging that you are a professional or experienced investor, or have taken appropriate professional advice, and accept the reduced requirements accordingly.

You are wholly responsible for ensuring that all aspects of the Company are acceptable to you. Investment in listed funds may involve special risks that could lead to a loss of all or a substantial portion of such investment. Unless you fully understand and accept the nature of the Company and the potential risks inherent in it you should not invest in the Company.

Further information in relation to the regulatory treatment of listed funds domiciled in Guernsey may be found on the website of the Guernsey Financial Services Commission at http://www.gfsc.gg/The-Commission/Pages/Home.aspx.

This information is provided by RNS

The company news service from the London Stock Exchange

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May 03, 2017 08:11 ET (12:11 GMT)