Sequoia Economic Infrastructure Income Fund Ltd.

Net Asset Value • Dec 15, 2023

National Storage Mechanism | Additional information

RNS Number : 8943W

Sequoia Economic Infra Inc Fd Ld

15 December 2023

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

15 December 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 92.89 pence per share from the prior month's NAV per share of 91.84 pence, representing an increase of 1.05 pence per share, underpinned by strong interest income in the month.

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

	pence per share
31 October NAV	91.84
Interest income, net of expenses	0.77
Asset valuations, net of FX movements	0.21
Accretion from share buyback	0.07
30 November NAV	92.89

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 US Federal Reserve, the Bank of England and the European Central Bank all left rates unchanged at the start of November at 5.25-5.50%, 5.25% and 4.00% respectively. The market is now pricing in rate cuts over the course of 2024, with base rates expected to range between 4.00% and 4.25% across all three regions by the end of next year.

Meanwhile, sovereign debt yields declined across the US, UK and the Eurozone during November, as the latest inflation data continues to trend downwards after peaking earlier this year. Yields on 10-year UK Gilts, German Bunds and US Treasuries have fallen to 4.22%, 2.45% and 4.32% as at 30 November, down from 4.51%, 2.82% and 4.93% month-on-month.

The most recent economic data points towards a helpful possible tailwind to the Company's NAV beyond the short-term, as falling interest rates are expected to increase the value of SEQI's underlying portfolio. Investors are also reminded that 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. As at 30 November 2023, the positive effect of pull-to-par is estimated to be worth approximately 3.3p per share over the course of the life of the Company's investments.

Rand Parent LLC (Atlas Air)

The Investment Adviser has invested $7.6 million in senior secured bonds of Rand Parent LLC during the month of November. Rand Parent LLC is the parent of Atlas Air Worldwide Holdings Inc. which was acquired by an investor group led by Apollo Global Management. Atlas Air is the NY-based global operator in the airfreight transportation services sectors. The yield-to-worst on this loan is approximately 10%.

Share buybacks

The Company continued to repurchase shares and bought back 9,315,998 of its ordinary shares at an average purchase price of 80.48 pence per share in November 2023. The Company first started buying shares back in July 2022 and has bought back 110,698,540 ordinary shares as of 30 November 2023 with the buyback continuing into December. This share repurchase activity continues to contribute positively to NAV per share over time.

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.

Portfolio update

The Company currently has strong liquidity, with cash of £115.6 million, compared to undrawn investment commitments of £99.1 million. Moreover, the Company's revolving credit facility (RCF) of £325 million is completely undrawn. The Company's policy in the current market 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.

The Company's invested portfolio consisted of 53 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 10.2% and a cash yield of 7.6% (excluding deposit accounts and investments rated lower than single C). The weighted average portfolio life remains short and is approximately 3.4 years. Private debt investments represented 96.6% of the total portfolio. The Company's invested portfolio currently consists of 45.1% floating rate investments and remains geographically diversified with 52.8% located across the USA, 24.1% in the UK, 23.0% in Europe, and 0.1% in Australia/New Zealand.

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. The Company entered into a $90million interest rate swap in October with a maturity of seven years to lock in a portion of the current high rates being paid by borrowers and to allow tactical management of the portfolio's fixed rate exposure.

The following investments settled in November 2023 (excluding small loan drawings of less than £0.5 million)

• A senior loan for $7.6 million to Rand Parent LLC (Atlas Air), a NY-based global operator in the airfreight transportation services sectors; and

• An additional senior loan for $5.0 million to Westinghouse, a leading provider of infrastructure services to operating nuclear power generating facilities across the US.

No investments sold or prepaid in November 2023

Non-performing loans

The Company released an RNS Announcement on the London Stock Exchange on 4 December 2023 with updates on its loans to Clyde Street and Bulb Energy. The Company's NAV for November 2023 has incorporated the changes to their valuations, which are independently marked by PWC as part of the monthly valuation process.

Further updates will be provided to shareholders in the future when material 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 (%)
AP Wireless Junior	EUR	Private	Mezz	59.3	Digitalisation	Telecom towers	4.55	7.90
AP Wireless US Holdco	USD	Private	HoldCo	58.6	Digitalisation	Telecom towers	6.09	9.48
Infinis Energy	GBP	Private	Senior	58.0	Renewables	Landfill gas	5.60	6.73
Project Tyre	USD	Private	Senior	53.9	Transport assets	Specialist shipping	11.09	11.09
Hawkeye Solar HoldCo	USD	Private	HoldCo	51.5	Renewables	Solar & wind	9.03	10.12
Expedient Data Centers	USD	Private	Senior	51.2	Digitalisation	Data centres	10.96	11.12
Workdry	GBP	Private	Senior	50.0	Utility	Utility Services	9.00	8.99
Tracy Hills TL 2025	USD	Private	Senior	49.4	Other	Residential infra	11.92	11.92
Kenai HoldCo 2024	EUR	Private	HoldCo	46.6	Power	Base load	0.00	13.16
Sacramento Data	USD	Private	Senior	44.8	Digitalisation	Data centres	7.44	8.62
Madrid Metro	EUR	Private	HoldCo	44.6	Transport assets	Rolling stock	1.43	8.11
Project Nimble	EUR	Private	HoldCo	43.7	Digitalisation	Data centres	8.66	11.32
Scandlines	EUR	Private	HoldCo	40.9	Transport	Ferries	6.85	7.66
Project Shark	CHF	Private	HoldCo	40.5	Digitalisation	Data centres	9.06	9.23
Perc Holdco	USD	Private	HoldCo	37.8	Power	Energy Efficiency	12.33	13.98

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 7260 2700
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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