Sequoia Economic Infrastructure Income Fund Ltd.

Net Asset Value • Nov 14, 2022

National Storage Mechanism | Additional information

RNS Number : 2200G

Sequoia Economic Infra Inc Fd Ld

14 November 2022

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO THE UNITED STATES

14th Nov 2022

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 92.14 pence per share from the prior month's NAV of 92.08, (being the 30 September 2022 cum-income NAV of 93.64 less the dividend of 1.5625 pence per share declared in respect of the quarter ended September 2022), representing an increase of 0.06 pence per share.

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

	pence per share
September NAV	93.64
Interest income, net of expenses	0.53
Asset valuations FX movements, net of hedges Dividends	-0.70  0.22 -1.56
October NAV	92.14

Portfolio update

As at 31 October, the Company had cash of £79.0m and had drawn £189.6m on its £325m revolving credit facility. The Company also had undrawn commitments on existing investments collectively valued at £77.2m. The Company's invested portfolio consisted of 63 private debt investments and 6 infrastructure bonds across 8 sectors and 27 sub-sectors. It had an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 11.12% and a cash yield of 7.2%. The weighted average portfolio life is approximately 3.8 years. Private debt investments represented 98% of the total portfolio and 58% of the portfolio comprised floating rate assets.

The Company's invested portfolio remains geographically diverse with 54% located across the US, 22% in the UK, 23% in Europe, and 1% in Australia/New Zealand. 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.

Over recent months reductions in asset values have been primarily due to increases in risk-free rates and credit spreads. The rise in risk-free rate adjustments has also increased the yield-to-maturity of floating rate investments and reduced the clean price of fixed rate assets (which also increases the yield-to-maturity). Investors are reminded that these declines are unrealised mark-to-market adjustments that should reverse over time as the investments approach their repayment date (the "pull-to-par").

The Investment Adviser expects the Company's dividend cover to improve materially for the 2023 financial year as the portfolio's floating rate investments (representing 58% of the portfolio) continue to benefit from increasing short term interest rates.

The following investments settled in October (excluding small loan drawings of less than $0.5m):

• An additional Senior loan for PLN 22.3m (equivalent to £4.0m) to Green Genius to finance the construction of solar PV projects in Poland.

The following assets sold or prepaid in October:

• A full sale of Heritage Power bonds for $16.4m, a holding company that owns a portfolio of 16 power plants located across Pennsylvania, Ohio, and New Jersey;

• A full sale of Embarq Corporation bonds for $13.7m, the third largest telecom operator in the U.S.; and

• A full sale of Inmarsat bonds for $10.0m, the largest UK satellite communications company.

There has been good progress over the past month in relation to the Company's non-performing loans:

• 4000 Connecticut Avenue (formerly Whittle School): the borrower has continued the execution of its strategy for the property and the value of this loan has remained unchanged this month.

• Bulb Energy: on 28 October 2022 the administrators of Bulb Energy Limited (Bulb) entered into a sale transaction that will move Bulb's customers to Octopus Energy. As has previously been disclosed to investors, Bulb is in a special administration regime (SAR), during which the Company has been prevented from enforcing its senior security over the assets of Bulb. Moreover, during the SAR, Bulb has remained loss-making and has needed Government funding to continue to provide electricity and gas to its customers. Administrators' expectation is that the overall financial effect of the sale will result in significant funds being paid to the purchaser for taking on (presently) loss making customers, and that to the extent that there are any proceeds from the sale of Bulb's customers, these will be used to repay in part the funding that the Government has provided to Bulb and (subject to potential legal challenges) not to repay the Company's senior debt.

Following the sale, Octopus is expected to continue to use the Bulb brand name and IT systems, both of which are owned by Simple Energy, for an interim period. Simple Energy is the parent of Bulb and is a guarantor of the Company's loan. The fees payable in the future by Octopus for the brand name and IT systems, together with Simple's other assets, will provide a further recovery for the Company on its loan to Bulb. To date, the Company has received £14.0 million from Simple Energy. The mark on the Bulb loan has fallen slightly this month, driven by minor changes to the assumptions made with regards to the timing of future recoveries.

Ordinary Portfolio Summary (15 largest settled investments)

Investment name	Currency	Type	Ranking	Value £m(1)	Sector	Sub-sector	Cash-on-cash yield (%)	Yield to maturity / worst (%)
AP Wireless US Holdco	USD	Private	HoldCo	62.1	TMT	Telecom towers	6.32	9.67
Project Tyre	USD	Private	Senior	61.0	Transport assets	Specialist shipping	8.26	8.26
Bannister Senior Secured	GBP	Private	Senior	59.9	Accommodation	Health care	10.11	12.04
Tracy Hills TL 2025	USD	Private	Senior	59.8	Other	Residential infra	11.12	11.12
Montreux HoldCo Facility	GBP	Private	HoldCo	57.4	Accommodation	Health care	12.21	12.39
GenOn Bowline Senior	USD	Private	Senior	57.3	Power	Energy transition	9.30	9.29
Hawkeye Solar HoldCo	USD	Private	HoldCo	56.5	Renewables	Solar & wind	9.23	10.32
AP Wireless Junior	EUR	Private	Mezz	55.7	TMT	Telecom towers	6.98	8.49
Expedient Data Centers	USD	Private	Senior	54.5	TMT	Data centers	9.33	10.11
Infinis Energy	GBP	Private	Senior	53.5	Renewables	Landfill gas	6.07	7.70
EIF Van Hook TL B 2024	USD	Private	Senior	53.5	Utility	Midstream	9.43	11.00
Madrid Metro	EUR	Private	HoldCo	51.0	Transport assets	Rolling stock	1.43	7.77
Workdry	GBP	Private	Senior	50.0	Utility	Utility Services	5.69	5.69
Sacramento Data Centre	USD	Private	Senior	48.1	TMT	Data centers	7.68	9.08
Brightline	USD	Private	Senior	47.5	Transport	Rail	8.81	10.33

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

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

Greg Taylor

Anurag Gupta

Jefferies International Limited                                                      +44 (0)20 7029 8000

Gaudi le Roux

Neil Winward

Tulchan Communications (Financial PR)                                    +44 (0)20 7353 4200

Martin Pengelley

Elizabeth Snow

Sanne Fund Services Guernsey Limited  

(Company Secretary)                                                                     +44 (0) 1481 755530

Matt Falla

Shona Darling                                                                                     

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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