Sequoia Economic Infrastructure Income Fund Ltd.

Net Asset Value • Jul 14, 2016

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RNS Number : 1332E

Sequoia Economic Infra Inc Fd Ld

14 July 2016

14 July 2016

Sequoia Economic Infrastructure Income Fund Limited

Net Asset Value as at 30 June 2016 and Investment Update

Ordinary Share update

As of the 30th June 2016, the Ordinary share class held 15 infrastructure bonds and 17 private debt investments, collectively valued at £309.7m including accrued interest, with an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 8.4% and a weighted average life across the acquired portfolio of approximately 6.0 years.

Approximately half of the Ordinary share class portfolio comprised of floating rate assets, with only four LIBOR floors (other than those at zero percent). As such the portfolio's yield is likely to increase over time if LIBOR increases.

The investments are diverse across the UK, Western Europe, Australia, Canada and the US and include a wide range of asset types including road, rail, utility, power, shipping, renewables and aircraft leasing.

In June, the Ordinary share class sold the remainder of its position in the GFL 7.50% 2018 bonds and reinvested the proceeds in the GFL 9.875% 2021 bonds, resulting in a yield pick up without compromising credit quality. In addition, the Ordinary share class made incremental purchases in the First Energy Solutions 2039 bonds and the Reliance Rail 2018, '19 and '20 unlisted bonds.

The Ordinary Share NAV rose to 101.16 from 98.07p per share, primarily through:

·       Interest income net of expenses of 0.48p;

·       A gain of 2.18p on net FX movements;

·       A gain of 0.42p in asset valuations.

Ordinary Portfolio Summary (10 largest settled investments)

Transaction name	Currency	Type	Ranking	Value £mm(1)	Sector	Sub-sector	Yield to maturity / worst (%)
A'lienor S.A.S. (A65)	EUR	Private	Senior	30.7	Transport	Road	4.89
Infinis Bridge	GBP	Private	HoldCo	23.8	Renewables	Solar & Wind	11.56
Exeltium Mezzanine	EUR	Private	Mezz	18.6	Power	PPA	9.15
Danaos Snr Secured 2018	USD	Private	Senior	18.5	Transport assets	Shipping	10.52
Neoen Production 1 S.A.S.U	EUR	Private	HoldCo	16.3	Renewables	Solar & Wind	6.99
IO Data Centers LLC	USD	Private	Senior	14.9	TMT	Data Centres	8.14
Biffa TL A	GBP	Private	Senior	12.8	Utility	Waste	7.81
GFL 9.875% 2021	USD	Public	Senior	12.1	Utility	Waste	7.56
Reliance Rail Finance 2018	AUD	Private	Senior	10.3	Transport assets	Rolling Stock	6.84
Green Plains TL B	USD	Private	Senior	10.2	Other	Alternative Fuel	10.58

Note (1) - excluding accrued interest

C Share update

As of the 30th June 2016, the C Share class held 2 infrastructure bonds and 2 private debt investments. These assets are collectively valued at £24.5m including 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 7.4 years.

Investments in June include:

·       A loan to IO Data Centres, a global data centre operator

·       Peterborough Progress Health, an availability-based UK Hospital PPP / PFI bond

·       Talen Energy Supply, a N. American electricity and power generation company

·       A small investment in DBB Jack-Up Services, a provider of specialist ships to the offshore wind market in the North Sea

In addition, the Company had two private debt positions in the process of settlement, with an aggregate value of £39.7m.

The Investment Adviser continues to see attractive opportunities for the deployment of capital into economic infrastructure debt, and expects the overall yield on the C Share portfolio to be 8% or higher as the fund becomes more fully invested.

The C Share NAV fell slightly from an initial NAV of 98.29 to 98.12p, primarily through:

·       A decline of 0.06p on net FX movements; and

·       A decline of 0.13p in asset valuations, mainly attributed to marking assets to the bid side.

Market Summary

June saw 13 infrastructure loans closing across the UK and Western Europe. Notable deals included the €875mm R7 Expressway loan in Slovakia, the €700mm Autoroutes Paris-Rhin-Rhone bond facility and the Thames Tideway Tunnel which reached financial close on June 2nd with £100mm of commercial bonds.  Over the month, the Bloomberg USD High Yield Corporate Bond Index rose by 1.3%.

Brexit

In the weeks leading up to the Brexit vote, the Investment Adviser's approach was to reduce potential NAV volatility arising from FX movements by gradually increasing hedging. For example, on the 22nd June (the day before the vote) approximately 75% of NAV was either Sterling assets or hedged into Sterling, compared to 60% three months previously.  The Ordinary Share Class currently has a net exposure of 24.7% to USD and 2.1% to EUR.

As a result of the Brexit vote, Sterling fell steeply against both the dollar and euro, by approximately 9.6% and 7.4% respectively. This had a positive effect on NAV with the gain in the Sterling value of the non-Sterling assets outweighing the loss on the hedges.

The Company has more than adequate resources to cover the cash costs associated with its hedging book. Each of its FX hedge providers has credit lines to the Company which means that the margin calls on the hedge portfolio have been modest.

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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