NAV and Investment Update
14 August 2020
Sequoia Economic Infrastructure Income Fund Limited
("SEQI" or the "Company")
The NAV for SEQI, the specialist investor in economic infrastructure debt, increased to 98.02 pence per share from the prior month's NAV of 97.72 pence per share (being the 30 June 2020 cum-income NAV of 99.28 pence less the dividend of 1.5625 pence per share declared in respect of the quarter ended 30 June 2020), representing an increase of 0.30 pence per share.
The small gain in asset valuations of 0.06p can be attributed primarily by spread tightening of comparable investments across the portfolio and continued positive credit developments in the wake of the ongoing COVID-19 pandemic (+0.52p), but partially offset by the result of the Salt Creek restructuring (-0.28p) and a further reduction in the value of the portfolio's public debt investments (-0.19p).
A full attribution of the changes in the NAV per share is as follows:
pence per share
Adjusted opening NAV
Interest income, net of expenses
FX movements, net of hedges
Increase in asset valuations
Update on the effects of COVID-19 on the Portfolio
The Investment Adviser, the Investment Manager, and PWC, the independent valuation agent have continued analysing the effect of COVID-19 on the Company's portfolio which also includes a market benchmarking exercise to conclude on spread and yield adjustments for each of the investments.
In summary, the spread widening across the portfolio during the second half of March 2020 continued its reversal throughout July, with several of the Company's investments performing better than expectations throughout the lockdown. However, the gains from continued spread tightening have been partially offset by a slightly lower-than-expected equity valuation in the restructuring of Salt Creek Midstream.
The Salt Creek Midstream (SCM) restructuring closed on 13 July 2020. As a result of the restructuring, SEQI's existing opco and holdco debt were cancelled and replaced by a combination of new debt, preferred shares, common shares, and warrants as well as participations in two joint ventures. Sequoia expects material upside should crude oil prices and activity in the Permian basin recover materially.
Further Portfolio update
As at 31 July 2020, the Company had cash of £102.5m and had drawn £80.3m on its £280m Revolving Credit Facility. The Company also had undrawn commitments on existing investments collectively valued at £55.8m. As of 31 July 2020, the Company's invested portfolio comprised of 62 private debt investments and 12 infrastructure bonds across 8 sectors and 28 sub-sectors. It had an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 10.1% and a weighted average life of approximately 5.6 years. Private debt investments represented 94% of the total portfolio and 64% of the portfolio comprised floating rate assets. The weighted average purchase price of the Company's investments was 96.7% of par. Investments which are pre-operational represented 11.2% of total assets.
The Company's invested portfolio remains geographically diverse with 52% located across the US, 16% in the UK, 26% 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 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.
The Company's settled investment activities during July include:
· A primary purchase of $45m American Tanker Inc's 7.75% 2025 bonds, which are backed by a ship finance company focused on the intercoastal U.S. Jones Act shipping market; and
· An additional $1.5m loan to Bourzou Equity, a company created for a data centre in Virginia.
The following Company's investments were sold or prepaid in July:
· $45m 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
· A €23.0m loan to Mainsite Logistik Holding, a logistics service provider to market leading industrial companies in Germany.
Ordinary Portfolio Summary (15 largest settled investments)
Yield to maturity / worst (%)
AP Wireless Junior
Hawaiki Mezzanine Loan
Expedient Data Centers Senior Secured 2026
Terra-Gen Power TL B
Solar & wind
Euroports 2nd Lien 2026
Scandlines Mezzanine 2032
Hawkeye Solar HoldCo 2030 1, 2, and 3
Solar & wind
Bizkaia TL 2021
Bannister Senior Secured
Jetpeaks HoldCo 2027
Adani Abbot HoldCo 2021
Tracy Hills TL 2025
GenOn Bowline Senior Secured 2026
Corral HoldCo 2024
Note (1) - excluding accrued interest
The Company's monthly investor report and additional portfolio disclosure will be made available at http://www.seqifund.com/.
For further information please contact:
Sequoia Investment Management Company +44 (0)20 7079 0480
Jefferies International Limited +44 (0)20 7029 8000
Gaudi le Roux
Tulchan Communications (Financial PR) +44 (0)20 7353 4200
Praxis Fund Services Limited (Company Secretary) +44 (0) 1481 755530
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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.