NOT FOR RELEASE, PUBLICATION
OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO THE UNITED
STATES
17
May 2024
Sequoia Economic Infrastructure Income Fund
Limited
("SEQI" or the "Company")
Monthly NAV and portfolio update
The NAV per share for SEQI, the
specialist investor in economic infrastructure debt, increased to
92.46 pence per share from the prior month's NAV per share of 92.05
pence, (being the 31 March 2024 cum-income NAV of 93.77 less the
dividend of 1.71875 pence per share declared in respect of the
quarter ended 31 March 2024 and payable on 23 May 2024),
representing an increase of 0.41 pence per share.
A full attribution of the changes in
the NAV per share is as follows:
|
pence per
share
|
31
March NAV
|
93.77
|
Interest income, net of
expenses
|
0.76
|
Asset valuations, net of FX
movements
|
-0.45
|
Subscriptions
|
0.10
|
Dividends
|
-1.72
|
30
April NAV
|
92.46
|
As the Company is approximately 100%
currency-hedged, it does not expect to realise any material FX
gains or losses over the life of its investments. 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.
Investment Policy amendment
The current Investment Policy
mandates at least 50% of the portfolio (net of interest rate
hedging, if any) should be in floating rate investments. Given the
current outlook for policy rates in the main markets that the
Company operates in, the Company has adjusted the Investment Policy
to target up to 60% of its portfolio (net of hedging) in fixed rate
investments (and therefore no less than 40% in floating rate
investments). This will have the practical effect of locking in
current interest rates, and therefore protecting the Company's
income should rates fall. The change in Investment Policy is not
deemed material under the FCA Listing rules and accordingly
shareholder approval is not required. The revised Investment Policy
can be found on the Company's website: Regulatory
News - Sequoia Economic Infrastructure Income Fund Limited
(seqi.fund)
Market Summary
During April 2024, central banks
across the UK, US and Eurozone maintained policy rates
at 5.25%, 5.50% and 4.00%, respectively.
Government bond yields trended upward during the same period, by
0.5% in the UK and US, and 0.3% in the Eurozone, which reflected a
realignment in market expectations of fewer rate reductions by the
end of the year (either one or two). The most recent data on CPI
inflation shows a downward trend in the UK and Eurozone, from 3.4%
and 2.6% in February 2024, to 3.2% and 2.4% in March 2024
respectively. In the US, where figures have been released for April
2024, CPI inflation declined to 3.4%, from 3.5% in March 2024. CPI
inflation is expected to return to close to the 2% target by the
end of the year across all three regions, mainly due to the
unwinding of energy-related base effects.
The Investment Adviser expects
abating inflation to provide a foundation for steadier credit
markets, highlighting that the long-term outlook on inflation and
base rates points towards a beneficial tailwind to the Company's
NAV, as falling rates would typically increase asset valuations.
The changes to the Investment Policy provide the opportunity to
lock in higher rates in a falling interest rate
environment.
Share buybacks
The Company bought back 12,791,719
of its ordinary shares at an average purchase price of 81.15 pence
per share in April 2024. The Company first started buying shares
back in July 2022 and has bought back 155,546,443 ordinary shares
as of 30 April 2024 with the buyback continuing into May 2024. This
share repurchase activity continues to contribute positively to NAV
accretion while investing in its own diversified portfolio. The
rate at which SEQI buys back shares will vary depending on various
factors, including the level of our share price discount to
NAV.
On 26 April 2024, the Company
cancelled 154,046,443 ordinary shares of no par value in the
capital of the Company which had previously been bought
back.
Portfolio update
The Company currently has strong
liquidity, with cash of £94.34 million, compared to undrawn
investment commitments of £65.73 million. The Company's revolving
credit facility (RCF) of £325 million is also undrawn. The
Company's policy in the current environment is to operate with
little or no leverage, but the RCF can be used to manage the
potential misalignment of new investments versus the repayment of
existing investments.
As at 30 April 2024, 58.7% of the
portfolio comprised of senior secured loans and 50.7% remained in
defensive sectors (Renewables, Digitalisation, Utility and
Accommodation). The Company's invested portfolio consisted of
53 private debt investments and 2 infrastructure bonds,
diversified across 8 sectors and 30 sub-sectors. It had
an annualised yield-to-maturity (or yield-to-worst in the case
of callable bonds) of 10.10% and a cash yield of 7.90% (excluding
deposit accounts). The weighted average portfolio life remains
short and is approximately 3.8 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
96.8% of the total portfolio, allowing the Company to capture
illiquidity yield premiums. The Company's invested portfolio
currently consists of 42.2%[1] floating rate
investments and remains geographically diversified with
53.2% located across the USA, 24.5% in the UK, 22.2% in
Europe, and 0.1% in Australia/New Zealand. As at 30 April
2024, the positive effect of pull-to-par is estimated to be worth
approximately 4.2p per share over the course of the life of the
Company's investments.
The portfolio remains highly
diversified by sector and size, with the average loan representing
about 1.6% of the total portfolio and the largest 4.4% of NAV as at
30 April 2024.
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.
Settled investments in April 2024
SEQI continues to carefully
scrutinise new investment opportunities in a disciplined manner
alongside other uses of proceeds such as share buybacks and
ensuring it has adequate liquidity on its RCF. Aside from these
uses of capital, the Company invested in an additional Senior loan
for $0.8 million to Sunrun Safe Harbor Holdco LLC, a manufacturer
of solar energy equipment in the USA.
No
significant investments (exceeding £0.5 million) sold or repaid in
April 2024
Non-performing loans
The Investment Adviser continues to
actively manage its non-performing loans with the loans being
independently marked to market by PwC as part of the monthly
valuation process. Further updates will be provided to shareholders
in the future when material developments occur.
Capital Markets Seminar - 9 May 2024
The Investment Adviser held a
virtual Capital Markets Seminar for institutional investors and
analysts on Thursday 9th May 2024 from the London Stock
Exchange. The online event featured a
series of short discussions presented by two guest speakers, the
Investment Adviser's wider team and Q&A following each session.
The aim of the event was to provide investors with an insight to
international infrastructure and credit investment themes and an
update on the positioning of Sequoia Economic Infrastructure Income
(SEQI) Fund against the current market backdrop.
Those interested in watching the SEQI's Capital
Markets Seminar can view a recording on the SEQI website:
https://www.seqi.fund/media
Portfolio Summary (15 largest settled
investments)
Investment name
|
Currency
|
Type
|
Ranking
|
Value
£m(2)
|
Sector
|
Sub-sector
|
Cash-on-cash yield
(%)
|
Yield to maturity/worst
(%)
|
Infinis Energy
|
GBP
|
Private
|
Senior
|
60.3
|
Renewables
|
Landfill
gas
|
5.39
|
6.20
|
AP Wireless Junior
|
EUR
|
Private
|
Mezz
|
60.1
|
Digitalisation
|
Telecom
towers
|
4.49
|
7.69
|
Workdry
|
GBP
|
Private
|
Senior
|
56.0
|
Utility
|
Utility
Services
|
8.94
|
8.93
|
Project Sienna
|
GBP
|
Private
|
Senior
|
55.0
|
Other
|
Waste-to-energy
|
9.97
|
10.42
|
Project Tyre
|
USD
|
Private
|
Senior
|
52.8
|
Transport
- vehicles
|
Specialist shipping
|
11.10
|
10.75
|
Expedient
|
USD
|
Private
|
Senior
|
52.0
|
Digitalisation
|
Data
centers
|
10.95
|
10.95
|
Hawkeye Solar
|
USD
|
Private
|
HoldCo
|
51.8
|
Renewables
|
Solar
& wind
|
9.06
|
10.29
|
Roseton
|
USD
|
Private
|
Senior
|
51.3
|
Power
|
Other
Electricity Generation
|
10.32
|
10.32
|
Kenai HoldCo 2024
|
EUR
|
Private
|
HoldCo
|
49.7
|
Power
|
Base
load
|
0.00
|
11.49
|
Sacramento Data
|
USD
|
Private
|
Senior
|
44.3
|
Digitalisation
|
Data
centers
|
7.45
|
8.80
|
Project Nimble
|
EUR
|
Private
|
HoldCo
|
43.5
|
Digitalisation
|
Data
centers
|
8.58
|
11.38
|
Euroports 2nd Lien 2030
|
EUR
|
Private
|
Mezz
|
42.7
|
Transport
- systems
|
Port
|
11.68
|
11.68
|
Scandlines Mezzanine 2032
|
EUR
|
Private
|
HoldCo
|
41.4
|
Transport
- systems
|
Ferries
|
6.70
|
7.20
|
Tracy Hills TL 2025
|
USD
|
Private
|
Senior
|
41.1
|
Other
|
Residential infra
|
11.86
|
11.86
|
Project Shark
|
CHF
|
Private
|
HoldCo
|
39.2
|
Digitalisation
|
Data
centers
|
8.99
|
8.99
|
|
|
|
|
|
|
|
|
|
Note (2) - 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: https://www.seqi.fund
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
|
|
|
Anurag Gupta
|
|
|
Matt Dimond
|
|
|
|
|
|
Jefferies International Limited
|
|
+44 (0)20 7029 8000
|
Gaudi Le Roux
|
|
|
Stuart Klein
Harry Randall
|
|
|
|
|
|
Teneo (Financial PR)
|
|
+44 (0)20 7260 2700
|
Martin Pengelley
|
|
|
Elizabeth Snow
|
|
|
|
|
|
Sanne Fund Services (Guernsey) Limited
|
|
+44 (0) 20 3530 3107
|
(Company Secretary)
|
|
|
Matt Falla
|
|
|
Devon Jenkins
|
|
|
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.