Sequoia Economic Infrastructure Income Fund Ltd.

Net Asset Value • Oct 14, 2015

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RNS Number : 1230C

Sequoia Economic Infra Inc Fd Ld

14 October 2015

14 October 2015

Sequoia Economic Infrastructure Income Fund Limited

Net Asset Value as at 30 September 2015 and Investment Update

As of the 30th September 2015, the Company owned 12 infrastructure bonds and 10 private debt investments, collectively valued at £110.9m including accrued interest, with an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 8.3% and a weighted average life across the acquired portfolio of approximately 6.9 years.

Acquisitions in September comprised a French PPA loan, as well as an addition to an existing loan for a US ethanol production company.

In addition, the Company has purchased a public bond and a loan with a combined purchase price of approximately £10.3m which are in the process of settling (and as such are not currently reflected in the NAV). 

In aggregate, the purchase price of these 24 transactions will represent approximately 82.8% 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 94% of par.

The increase in the Company's NAV to 96.20p per share in the month arises through:

· Interest income net of expenses of 0.3p per share; plus

· FX gains, net of hedge movements, of 0.8p per share; less

· adverse market movements, including marking investments purchased for the portfolio to the bid price of 0.9p per share.

Portfolio Summary

Ten largest investments

Transaction name	Currency		Type	Value £mm		% of NAV	Sector	Sub-sector	Yield to maturity / worst (%)
Exeltium Mezzanine	EUR	Private		11.8	8.2%		Power	PPA	8.50
Biffa TL A	GBP	Private		11.6	8.1%		Utility	Waste	7.20
Danaos Snr Secured 2018	USD	Private		8.5	5.9%		Transport assets	Shipping	7.29
Dulles Greenway 2029	USD	Public		7.7	5.3%		Transport	Road	6.97
North Las Vegas Water 6.572% 2040	USD	Public		7.2	5.0%		Utility	Water	7.47
Green Plains TL B	USD	Private		6.6	4.6%		Other	Alternative fuel	6.02
Global Ship Lease 10% 2019	USD	Public		6.6	4.6%		Transport assets	Shipping	10.09
Ascendos Rail 2nd lien	EUR	Private		5.4	3.7%		Transport assets	Rail	4.81
Electricinvest Holding (Viridian) 13.5%	GBP	Private		5.0	3.5%		Utility	Electric Supply	13.50
Care UK Senior 2019	GBP	Public		4.9	3.4%		Accommodation	Elderly Care	8.42
Sub- total / average				75.2	52.2%				7.89
Positions outside top ten				34.0	23.5%				9.06
Portfolio total / average				109.2	75.7%				8.26

NB. Value column above excludes accrued interest and unsettled trades of a further £10.3m.

Market Summary

September showed some activity in the infrastructure debt sector with nine transactions closing across the UK and Western Europe. Notable deals included the £138mm financing for the Cramlington UK Biomass Plant and the £70mm term loan for the Sisters and North Steads Wind Farms.  In addition, the £36mm refinancing of the Herten Waste-to-Energy Plant also closed.

Senior secured infrastructure debt for core assets, particularly having availability payment mechanisms, continues to be aggressively bid with margins approaching +100 bps with both bank and institutional investors active.  In demand driven transactions, the Fund has continued to see opportunities to achieve yields in excess of 7% in both primary originations and continued bank deleveraging.

Sterling weakened slightly against the US dollar in September, moving from $1.53 to $1.51 and strengthened slightly against the euro, ending the month at £0.74 compared with £0.73 at end of August.

Corporate bond spreads widened slightly, with widening particularly in the US Oil & Gas, commodity and energy sectors. In Europe corporate news was dominated by Volkswagen. Both markets were impacted by news flow from China. The Bloomberg USD High Yield Corporate Bond Index fell by 2% over the month. In the loan markets, prices on aggregate were generally softer. The news flow led to high volatility in both the credit and currency markets.

With the Fed deciding not to raise the reserve rate, US yields fell during September. 10-year US Treasury rates fell by 15 bps to 2.06%. Euro term rates rose over September with the 10-year Bund rising from 103.4 to 104.7.

The Company continues to find attractive investment opportunities and has exclusivity on two transactions that are expected to settle in October and November.

Current Portfolio vs Target Portfolio

The charts below show the current portfolio, as described above, and the composition of the anticipated portfolio (based on the Investment Advisor's pipeline of transactions) once the fund's remaining cash has been invested. 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 57% of current invested assets, and bonds are expected to drop to 37% from 43% currently. European exposure is expected to rise to 36%, up from 29% of current invested assets, and US exposure is expected to drop to 42% from 46% currently. The floating rate component is currently 43% of invested assets.

The Investment Adviser also expects to further diversify the portfolio, moving from 11 subsectors as of the end of September 2015 to a target of 12 or more subsectors when fully invested.

The Company's monthly investor report 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.  The Company has been advised that the Shares can be considered as "excluded securities" for the purposes of the FCA rules regarding the definition and promotion of Non-Mainstream Pooled Investments (NMPIs).

This information is provided by RNS

The company news service from the London Stock Exchange

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