Sequoia Economic Infrastructure Income Fund Ltd.

Net Asset Value • Aug 15, 2023

National Storage Mechanism | Additional information

RNS Number : 2769J

Sequoia Economic Infra Inc Fd Ld

15 August 2023

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

15th August 2023

Sequoia Economic Infrastructure Income Fund Limited

("SEQI" or the "Company")

NAV update

The NAV per share for SEQI, the specialist investor in economic infrastructure debt, increased to 92.41 pence per share from the prior month's NAV per share of 91.95 pence, (being the 30 June 2023 cum-income NAV of 93.67 less the dividend of 1.71875 pence per share declared in respect of the quarter ended 30 June 2023 and paid in August 2023), representing an increase of 0.46 pence per share.

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

	pence per share
June NAV	93.67
Interest income, net of expenses	0.77
Asset valuations, net of FX movements	-0.37
Accretion from share buyback	0.06
Dividend	-1.72
July NAV	92.41

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

The Bank of England (BoE) raised borrowing costs by 25 basis points in early August following "better than expected" data. UK equities also rose during the month of July 2023, as investors grew more confident of less aggressive rate hikes by the BoE. The BoE now expects inflation to fall to 5% by the end of 2023, to keep on falling in 2024 and reach its 2% target by early 2025. UK inflation data for July is expected to be released tomorrow ahead of the BoE's next rate decision in September. In addition, the Federal Reserve and European Central Bank both raised their rates by 25 basis points, as inflation has shown signs of abating across both regions and both central banks have reported resilient growth and below-market forecasts for inflation.

Given the high proportion of floating rate loans in the portfolio (55%) the cumulative effect of interest rate rises has been to increase the yield-to-maturity on the portfolio from 9.8% to 12.0% over the last twelve months.

Over the month, credit spreads remained broadly flat in the US, whilst the Company observed further tightening in benchmark spreads in the UK and Europe due to improved market sentiment. This was reflected in a moderate increase in the valuation of fixed rate assets such as Infinis, Project Nimble and AP Wireless on the Company's loan book. In general, credit markets have performed well in July 2023, with high yield bonds outperforming government bonds.

Share buybacks

The Company continued to repurchase shares and bought back 10,519,198 of its ordinary shares at an average purchase price of 77.99 pence per share in July 2023. Following this, the Company holds 73,049,745 ordinary shares in Treasury following the commencement of a share buyback programme in July 2022. The Board and the Investment Adviser remain confident in the Company's NAV, including uplifts over time expected from the pull-to-par effect. The rate at which SEQI buys back Shares will vary depending on various factors, including the level of our Share price discount to NAV. The Company believes that buying in Shares at greater discounts will generate Shareholder value over the long term.

Portfolio update

The Company is attractively positioned from a liquidity perspective with cash of £101.7m available, compared to undrawn commitments on existing investments of £36.1m. The Company's is currently not geared and its revolving credit facility is undrawn, resulting in additional capacity to manage future volatility in exchange rates, while simultaneously reducing cash drag on non-invested capital. The Company also has an active pipeline of new investments with attractive yields in the current interest rate environment and intends to draw on the revolving credit facility when appropriate while prudently balancing its capital allocation. Further updates will be provided to shareholders upon the completion of these deals during the summer of 2023. The pipeline is diversified by sector, sub-sector, and jurisdiction, with yields ranging from 9% -11%.

The Company's invested portfolio consisted of 58 private debt investments and 4 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 12.0% and a cash yield of 7.4%. The weighted average portfolio life remains short and is approximately 3.3 years. Private debt investments represented 97.2% of the total portfolio. The Company's invested portfolio remains geographically diverse with 48.3% located across the US, 27.1% in the UK, 24.5% in Europe, and 0.1% in Australia/New Zealand.

As at 31 July 2023, the pull-to-par is estimated to be worth approximately 6.7p/share over the course of the life of the Company's investments. Investors are reminded that declines in unrealised mark-to-market adjustments should reverse over time as the investments approach their repayment date (the "pull-to-par" effect), assuming there are no performance related adjustments required to their value.

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 on its hedging book.

The following investments settled in July 2023 (excluding small loan drawings of less than £0.5m):

• Two additional Senior loans for £3.4m to Project Octopus, a telecom infrastructure services provider based in the UK; and

• An additional Senior loan for PLN 7.6m (equivalent to £1.5m) to Green Genius to finance the construction of solar PV projects in Poland.

No investments sold or prepaid in July 2023

Non-performing loans  

The Investment Advisor continues to actively manage its two non-performing loans (which together represent 3.5% of NAV) with the loans independently marked to market by PwC as part of the monthly valuation process. Further updates will be provided to shareholders in the future when developments occur.

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 (%)
Bannister Senior Secured 2025	GBP	Private	Senior	58.9	Accommodation	Health care	10.62	12.73
AP Wireless Junior	EUR	Private	Mezz	56.9	TMT	Telecom towers	4.69	8.45
AP Wireless US Holdco	USD	Private	HoldCo	56.6	TMT	Telecom towers	6.18	10.19
Lightspeed Fibre Group Ltd	GBP	Private	Senior	56.0	TMT	Broadband	6.69	15.56
Infinis Energy	GBP	Private	Senior	54.5	Renewables	Landfill gas	5.96	7.61
Project Tyre	USD	Private	Senior	53.2	Transport assets	Specialist shipping	10.75	10.75
Hawkeye Solar HoldCo 2030	USD	Private	HoldCo	50.8	Renewables	Solar & wind	8.99	9.95
Workdry	GBP	Private	Senior	50.0	Utility	Utility Services	8.43	8.42
Expedient Data Centers Senior	USD	Private	Senior	49.9	TMT	Data centers	11.04	11.35
Tracy Hills TL 2025	USD	Private	Senior	48.4	Other	Residential infra	11.82	11.82
Kenai HoldCo 2024	EUR	Private	HoldCo	45.6	Power	Base load	0.00	30.24
Montreux HoldCo Facility	GBP	Private	HoldCo	45.2	Accommodation	Health care	17.67	0.00
Sacramento Data Centre Senior	USD	Private	Senior	43.4	TMT	Data centers	7.53	8.85
Madrid Metro	EUR	Private	HoldCo	43.1	Transport assets	Rolling stock	1.47	8.72
Project Nimble	EUR	Private	HoldCo	42.5	TMT	Data centers	8.87	11.94

Note (1) - 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

Greg Taylor

Anurag Gupta

Jefferies International Limited                                                  +44 (0)20 7029 8000

Gaudi Le Roux

Stuart Klein

Teneo (Financial PR)                                                                  +44 (0)20 7353 4200

Martin Pengelley

Elizabeth Snow

Sanne Fund Services (Guernsey) Limited                               +44 (0) 20 3530 3107

(Company Secretary)                                                                       

Matt Falla                                                                                             

Lisa Garnham                                                                                     

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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