NOT FOR RELEASE, PUBLICATION
OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO THE UNITED
STATES
15
July 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
95.29 pence per share from the prior month's NAV per share of 94.30
pence, representing an increase of 0.99 pence per share.
A full attribution of the changes in
the NAV per share is as follows:
|
pence per
share
|
31
May NAV
|
94.30
|
Interest income, net of
expenses
|
0.72
|
Asset valuations, net of FX
movements
|
0.20
|
Subscriptions / share
buybacks
|
0.07
|
30
June NAV
|
95.29
|
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.
Market Summary
During June 2024, the ECB announced
the first rate cut of 0.25% to 3.75% following a sustained
reduction in inflation. Following the announcement, which was on 6
June 2024, the yields on the 5-year German sovereign bond
marginally trended downwards, whilst the equivalent French
sovereign bond exhibited more volatility in the run up to snap
election in France. Bond yields on the 5-year US and UK sovereign
debt marginally trended downwards, as the Federal Reserve and the
Bank of England maintained policy rates at 5.50% and 5.25%
respectively. As at 30 June 2024, 5-year yields were down
marginally across all three regions from the previous month, by
0.1% in the Eurozone, and approximately 0.2% in the US and
UK.
In the UK, the most recent data on
CPI inflation shows that it is back down to the Bank of England's
2.0% target for now, down from 2.4% in April 2024. Inflation is
also abating in the US, down to 3.0% in June 2024, from 3.3% in May
2024. In the ECB, CPI inflation has reduced to 2.5% in June 2024,
down from 2.6% in May 2024. CPI inflation is expected to remain
close to its target of 2.0% by the end of the year across all three
regions, mainly due to the unwinding of energy-related base
effects.
Due to the slight reduction in risk
free rates, as well as benchmark spreads, particularly in the
energy and utilities sectors, the valuation of most fixed rate
instruments (which represents 58.5% of the portfolio) has
marginally increased during June 2024. In keeping with this, the
pull to par has also reduced from 3.8 pence per share in May 2024
to 3.7 pence per share in June 2024.
The Investment Adviser also 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.
UK
General Election Results
The General Election on 4 July 2024
produced a substantial majority for The Labour Party. The outcome
had been predicted by opinion polls and was therefore already
largely priced-in to markets. UK gilt yields, equities and the
Sterling exchange rate remained largely unchanged after the results
were announced.
Share buybacks
The Company bought back 8,021,984 of
its ordinary shares at an average purchase price of 79.23 pence per
share in June 2024. The Company first started buying back shares in
July 2022 and has bought back 167,819,395 ordinary shares as of 30
June 2024, with the buyback continuing into July 2024. This share
repurchase activity by the Company continues to contribute
positively to NAV accretion. The rate at which SEQI buys back
shares will vary depending on various factors, including the level
of our share price discount to NAV.
Portfolio update
The Company has drawn £15.0 million
on its revolving credit facility (RCF) of £325.0 million during
June 2024 and currently has cash of £48.44 million (inclusive of
interest income and RCF drawings), and undrawn investment
commitments of £45.5 million. The RCF was utilised during May 2024
to manage cashflows through the timing of new investments against
the repayment of existing investments.
As at 30 June 2024,
the Company's invested portfolio consisted of 54 private debt
investments and 2 infrastructure bonds, diversified across
8 sectors and 30 sub-sectors. 57.2% of the portfolio
comprised of senior secured loans and 52.0% remained in defensive
sectors (Renewables, Digitalisation, Utility and Accommodation). It
had an annualised yield-to-maturity (or yield-to-worst in the
case of callable bonds) of 10.39% and a cash yield of 8.3%
(excluding deposit accounts). The weighted average portfolio
life remains short and is approximately 3.7 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
94.2% of the total portfolio, allowing the Company to capture
illiquidity yield premiums. The Company's invested portfolio
currently consists of 41.5%[1] floating rate
investments and remains geographically diversified with
51.9% located across the USA, 26.9% in the UK, 21.1% in
Europe, and 0.1% in Australia/New Zealand.
The portfolio remains highly
diversified by sector and size, with the average loan representing
about 1.6% of the total portfolio and the largest loan is 4.2% of
NAV as at 30 June 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 June 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 significant liquidity on its RCF. Aside from these
uses of capital, the following investments settled in June 2024
(excluding small loan drawings of less than £0.5
million):
• An additional senior loan for £4.4
million to Project Octopus, a telecom infrastructure services
provider based in the UK.
No significant investments
(exceeding £0.5 million) sold or repaid in June 2024.
Non-performing loans
The Investment Advisor continues to
actively manage its non-performing loans with the loans being
independently marked to market by PwC as part of the monthly review
process. We will continue to provide updates to shareholders on a
monthly basis.
Notice of Annual General Meeting ("AGM")
The Board and Investment Advisor are
pleased to announce that SEQI's Annual Report for the financial
year ending 31 March 2024 was published on Wednesday, 26
June 2024. The Company's AGM is scheduled for 1 August and the AGM
Notice has been separately published on the Company's website. The
AGM includes the Company's scheduled tri-annual Continuation Vote
which is further explained in the AGM Notice.
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
|
61.1
|
Renewables
|
Landfill
gas
|
5.32
|
5.99
|
AP Wireless Junior
|
EUR
|
Private
|
Mezz
|
59.8
|
Digitalisation
|
Telecom
towers
|
4.48
|
7.66
|
Workdry
|
GBP
|
Private
|
Senior
|
56.0
|
Utility
|
Utility
Services
|
8.93
|
8.93
|
Project Sienna
|
GBP
|
Private
|
Senior
|
55.5
|
Other
|
Waste-to-energy
|
9.89
|
10.41
|
Hawkeye Solar
|
USD
|
Private
|
HoldCo
|
52.7
|
Renewables
|
Solar
& wind
|
8.80
|
9.67
|
Project Tyre
|
USD
|
Private
|
Senior
|
52.6
|
Transport
assets
|
Specialist shipping
|
11.11
|
10.75
|
Expedient
|
USD
|
Private
|
Senior
|
51.4
|
Digitalisation
|
Data
centers
|
10.95
|
10.95
|
Kenai HoldCo 2024
|
EUR
|
Private
|
HoldCo
|
50.4
|
Power
|
Base
load
|
0.00
|
10.66
|
Roseton
|
USD
|
Private
|
Senior
|
50.1
|
Power
|
Other
Electricity Generation
|
10.32
|
10.32
|
Sacramento
|
USD
|
Private
|
Senior
|
44.5
|
Digitalisation
|
Data
centers
|
7.34
|
8.43
|
Project Nimble
|
EUR
|
Private
|
HoldCo
|
43.4
|
Digitalisation
|
Data
centers
|
8.52
|
11.21
|
Euroports
|
EUR
|
Private
|
Mezz
|
43.0
|
Transport
|
Port
|
11.51
|
11.33
|
Scandlines
|
EUR
|
Private
|
HoldCo
|
41.2
|
Transport
|
Ferries
|
6.68
|
7.14
|
Gadwall Holdings (3)
|
GBP
|
Private
|
HoldCo
|
41.2
|
Accommodation
|
Health
care
|
0.00
|
35.89
|
Tracy Hills
|
USD
|
Private
|
Senior
|
40.7
|
Other
|
Residential infra
|
11.86
|
11.86
|
|
|
|
|
|
|
|
|
|
Note (1) - inclusive of interest
rate swap.
Note (2) - excluding accrued
interest.
Note (3) - Montreux HoldCo Facility
was restructured and replaced with an equivalent loan on extended
terms to a newly established entity, Gadwall Holdings. As part of
the restructuring, an additional loan for £34.8 million was also
made to ACG BidCo Limited as a senior secured loan. The combined
value of both loans to the Group equates to 5.2% of the
NAV.
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
Faye Calow
|
|
|
|
|
|
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.