Sequoia Economic Infrastructure Income Fund Ltd.

Net Asset Value • Sep 14, 2015

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RNS Number : 8959Y

Sequoia Economic Infra Inc Fd Ld

14 September 2015

14 September 2015

Sequoia Economic Infrastructure Income Fund Limited

Net Asset Value as at 28 August 2015 and Investment Update

As of the 28th August 2015, the Company owned 12 infrastructure bonds and nine private debt investments, collectively valued at £94.5m excluding accrued interest, with an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 7.9% and a weighted average life across the acquired portfolio of approximately 6.7 years.

Acquisitions in August comprised an Australian rolling stock private debt position, as well as a HoldCo loan for an Irish electricity utility company. 

In addition, the Company has purchased an unlisted note and a loan with a combined purchase price of approximately £12.9m which are in the process of settling (and as such are not currently reflected in the NAV). 

In aggregate, the purchase price of these 23 transactions will represent approximately 74.6% of the net proceeds of the IPO. The investments are across the UK, Western Europe, Australia and the US and include the road, rail, shipping, utility, elderly care and aircraft leasing sectors. The Company has not disposed of any investments since the IPO apart from participating in a tender for £1.6m of bonds, where the issuer bought the bonds back at par, resulting in a modest gain for the Company of circa 3%. The weighted average purchase price of the Company's acquired investments is approximately less than 92% of par.

The increase in the Company's NAV to 95.96p per share arises through:

·      Interest income net of expenses of 0.2p per share; plus

·      FX gains, net of hedge movements, of 1.0p per share; less

·      adverse market movements, including marking investments held in the portfolio to the bid price, of 0.5p per share; less

·      an adjustment to the July NAV of 0.4p per share.

Portfolio Summary

Ten largest investments

Transaction name	Currency	Type	Value £mm	% of NAV	Sector	Sub-sector	Yield to maturity / worst (%)
Biffa TL A	GBP	Private	11.6	8.1%	Utility	Waste	6.95
Danaos Snr Secured 2018	USD	Private	8.4	5.8%	Transport assets	Shipping	7.42
Dulles Greenway 2029	USD	Public	7.6	5.3%	Transport	Road	6.82
North Las Vegas Water 6.572% 2040	USD	Public	7.1	4.9%	Utility	Water	7.51
Global Ship Lease 10% 2019	USD	Public	6.6	4.6%	Transport assets	Shipping	9.11
Ascendos Rail 2nd lien	EUR	Private	5.3	3.7%	Transport assets	Rail	4.81
Green Plains TL B	USD	Private	5.2	3.6%	Other	Alternative fuel	6.22
Electricinvest Holding (Viridian) 13.5%	GBP	Private	5.0	3.5%	Utility	Electric Supply	13.50
Castlelake 2014-1 B	USD	Private	4.8	3.3%	Transport assets	Aircraft	7.23
Bristow Group 6.25% 2022	USD	Public	4.0	2.8%	Transport assets	Aircraft	8.44
Sub- total / average			65.6	45.6%			7.66
Positions outside top ten			28.8	20.0%			8.58
Portfolio total / average			94.4	65.6%			7.94

NB. Value column above excludes accrued interest and unsettled trades of a further £12.9m.

Market Summary

Despite the normal summer slowdown, August showed some activity in the infrastructure debt sector with nine transactions closing across the UK and Western Europe. Notable deals included the £1bn senior credit facility for the Thames Tideway Tunnel, the £254m senior secured bond issue for the West of Duddon Sands Wind Farm.  In addition, the €162m Dalaman airport loan in Turkey closed.

Senior secured infrastructure debt for core assets, particularly having availability payment mechanisms, continues to be aggressively bid with margins approaching +100 bps.  In the mezzanine area, however, and for demand driven transportation, the Fund has continued to see opportunities to achieve yields in excess of 7%.

Sterling weakened slightly against the US dollar in August, moving from $1.56 to $1.54 and fell more materially against the euro, ending the month at £0.73 compared with £0.70 at end of July.

Corporate bond spreads widened slightly, with most of the widening in the US as opposed to Europe. For example the Bloomberg USD High Yield Corporate Bond Index fell by 2% over the month. In the loan markets, prices were generally softer, albeit against a backdrop of thin trading in the August holiday period. 

After a period of relatively high volatility in both the credit and currency markets, a number of commentators are projecting a more stable fourth quarter, with credit spreads across the bond and loan markets expected to stabilise or moderately tighten.

Interest rates increased during August. 10-year US Treasury yields rose by 6 bps to 2.21%. Euro term rates also rose over August with the 10-year Bund declining from 103.45 to 102.48.

The Company continues to find attractive investment opportunities and has exclusivity on multiple transactions structured by the Investment Advisor that are expected to settle next month.

Current Portfolio vs Target Portfolio

Anticipated portfolio composition changes (based on the Investment Advisor's pipeline of transactions) once the fund's remaining cash has been invested are described below.

The largest anticipated changes are an increase in private debt exposure versus bonds and an increase in European investments versus US investments. Private debt is expected to increase to 67%, from 52% of current invested assets, and bonds are expected to drop to 33% from 48% currently. European exposure is expected to rise to 31%, up from 18% of current invested assets, and US exposure is expected to drop to 44% from 55% currently. The floating rate component is currently 47% of invested assets.

The Investment Adviser also expects to further diversify the portfolio, moving from 10 subsectors as of the end of August 2015 to a target of 12 or more subsectors when fully invested.

The Company's monthly investor report, Solvency II certificate and additional portfolio disclosure will be made available at http://www.seqifund.com/.

Sequoia Investment Management Company

Randall Sandstrom / Steve Cook                         Telephone 020 7079 0483 / 020 7079 0481

Stifel Nicolaus Europe Limited

Neil Winward / Mark Bloomfield / Gaudi Le Roux              Telephone 020 7710 7600

International Fund Management Limited

Chris Hickling                                                                Telephone 01481 737600

About Sequoia Economic Infrastructure Income Fund Limited

The Company is a Guernsey registered closed-ended investment company that 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 company news service from the London Stock Exchange

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