Sequoia Economic Infra Inc Fd Ld NAV and Investment Update (9742M)

TIDMSEQI

RNS Number : 9742M

Sequoia Economic Infra Inc Fd Ld

15 May 2020

15 May 2020

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 96.80 pence per share from the prior month's NAV of 96.69 pence per share (being the 31 March 2020 cum-income NAV of 98.2525 pence less the dividend of 1.5625 pence per share declared in respect of the quarter ended 31 March 2020), representing an increase of 0.11 pence per share.

The gain in asset valuations can be attributed primarily to minor spread tightening of comparable investments, and positive credit developments in the wake of the ongoing COVID-19 pandemic, partially offset by a decrease in the market prices of the Company's aircraft securitisation investments.

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

 
                                   pence per 
                                     share 
---------------------------------  --------- 
March NAV                            96.69 
---------------------------------  --------- 
Interest income, net of expenses     0.70 
FX movements, net of hedges          -0.09 
Increase in asset valuations         1.06 
Dividend declared in respect of 
 the quarter ended 31 March          -1.56 
---------------------------------  --------- 
April NAV                            96.80 
---------------------------------  --------- 
 

Update on the loan to a US midstream business

As we noted in the Monthly Investor Report as at 31 March 2020, we continue to closely monitor an investment in the senior and holdco loans of a US midstream business, based in the Permian basin. These loans are equal to 2.8% of the Company's gross asset value and approximately 81% of the Company's exposure to this borrower is through senior secured loans. As previously mentioned, this business is still in its ramp-up phase and capex overruns and the fall in the oil price has left it with a materially weakened credit position.

The Investment Adviser, together with the other lenders to the business, has appointed third-party consultants including legal counsel to advise on a range of scenarios which could include a restructuring of the business. As a result, this loan was marked down in March significantly to reflect the current situation.

Discussions among all stakeholders are ongoing, and it appears the highest probability outcome is a consensual restructuring of the business, although it is possible that this may not occur. On the basis of the current discussions, the Investment Adviser does not believe that this loan needs any further mark downs. This assessment is based on valuation work undertaken by the third-party consultants referenced above and is subject to independent verification by PWC.

Further Portfolio update

As at 30 April, the Company's invested portfolio comprised of 60 private debt investments and 13 infrastructure bonds across 8 sectors and 29 sub-sectors. It had an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 11.5% and a weighted average life of approximately 5.7 years. Private debt investments represented 93% of the total portfolio and 66% of the portfolio comprised floating rate assets. The weighted average purchase price of the Company's investments was 96.4% of par. Investments which are pre-operational represented 11.7% of total assets.

The Company's invested portfolio remains geographically diverse with 52% located across the US, 15% in the UK, 27% in Europe, and 6% in Australia/New Zealand. Currently the Company is not investing in Portugal or Italy but has selectively invested in opportunities in Spain. The Company's pipeline of economic infrastructure debt investments remains strong and is diversified by sector, sub-sector, and jurisdiction.

At month end, approximately 102.0% 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.

The Company's settled investment activities during April include:

-- A $54.0m primary holdco loan to Hawkeye Solar, backed by an operating portfolio of residential solar project companies;

-- An additional $15.0m secondary acquisition of GE's 5% perpetual bonds, an equipment manufacturer that is shifting its focus to the power, renewables, and aviation sectors;

-- An additional $14.6m secondary acquisition of Terra-Gen Finance TL B, a renewable energy company;

-- An additional EUR13.3m secondary acquisition of Ziton, an offshore wind turbine maintenance company located in Denmark;

-- An additional $9.0m disbursement to Sierra financing 2024, the financing of a portfolio of nine Californian gas turbines;

-- An additional $5.0mm secondary acquisition of American Tanker Inc's 9.25% 2022 bonds, which are backed by a ship finance company focused on the intercoastal U.S. Jones Act shipping market; and

-- An additional $1.2m disbursement to Bourzou Equity, a company created for the construction of a data centre in Virginia.

None of the Company's investments were sold or prepaid in April.

Ordinary Portfolio Summary (15 largest settled investments)

 
 Investment name         Currency        Type    Ranking   Value       Sector         Sub-sector          Yield 
                                                            GBPm                                    to maturity 
                                                             (1)                                        / worst 
                                                                                                            (%) 
 
 AP Wireless Junior         EUR       Private       Mezz    58.5          TMT     Telecom towers            6.6 
 Hawaiki Mezzanine                                                                      Undersea 
  Loan                      USD       Private       Mezz    53.6          TMT              cable           14.9 
 Expedient Data 
  Centers                   USD       Private     Senior    49.0          TMT       Data centers            7.5 
 Terra-Gen Power 
  TL B                      USD       Private     Senior    45.2   Renewables       Solar & wind            8.7 
 Hawkeye Solar HoldCo 
  2030                      USD       Private     HoldCo    42.9   Renewables       Solar & wind            8.2 
 Jetpeaks HoldCo 
  2027                      USD       Private     HoldCo    42.8        Power   Elec. generation            7.6 
 Tracy Hills TL                                                                      Residential 
  2025                      USD       Private     Senior    42.3        Other              infra            9.7 
 Bannister Senior 
  Secured                   GBP       Private     Senior    39.9      Accomm.        Health care            9.2 
 Euroports 2nd Lien 
  2026                      EUR       Private       Mezz    39.4    Transport               Port            9.8 
 Bizkaia TL 2021            EUR       Private     HoldCo    38.0        Power   Elec. generation            9.4 
 Adani Abbot HoldCo 
  2021                      AUD       Private     HoldCo    37.9    Transport               Port           12.7 
 Scandlines Mezzanine 
  2032                      EUR       Private     HoldCo    37.8    Transport            Ferries            8.9 
 Whittle Schools 
  B                         USD       Private     Senior    36.4        Other    Private schools           15.5 
 Salt Creek Midstream       USD       Private     Senior    36.0      Utility          Midstream           28.5 
 Corral HoldCo 2024         USD       Private     HoldCo    35.6        Other           Refinery           14.4 
 

Note (1) - excluding accrued interest

The Company's monthly investor report and additional portfolio disclosure will be made available at http://www.seqifund.com/ .

LEI: 2138006OW12FQHJ6PX91

For further information please contact:

   Sequoia Investment Management Company                              [phone] 

Steve Cook

Dolf Kohnhorst

Randall Sandstrom

Greg Taylor

Anurag Gupta

Jefferies International Limited [phone]

Gaudi le Roux

Neil Winward

   Tulchan Communications (Financial PR)                                    [phone] 

Martin Pengelley

Elizabeth Snow

Deborah Roney

   Praxis Fund Services Limited (Company Secretary)                 [phone] 

Matt Falla

Katrina Rowe

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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May 15, 2020 02:00 ET (06:00 GMT)