Sequoia Economic Infrastructure Income Fund Ltd.

Net Asset Value • Aug 14, 2020

National Storage Mechanism | Additional information

RNS Number : 1255W

Sequoia Economic Infra Inc Fd Ld

14 August 2020

14 August 2020

Sequoia Economic Infrastructure Income Fund Limited

("SEQI" or the "Company")

NAV update

The NAV for SEQI, the specialist investor in economic infrastructure debt, increased to 98.02 pence per share from the prior month's NAV of 97.72 pence per share (being the 30 June 2020 cum-income NAV of 99.28 pence less the dividend of 1.5625 pence per share declared in respect of the quarter ended 30 June 2020), representing an increase of 0.30 pence per share.

The small gain in asset valuations of 0.06p can be attributed primarily by spread tightening of comparable investments across the portfolio and continued positive credit developments in the wake of the ongoing COVID-19 pandemic (+0.52p), but partially offset by the result of the Salt Creek restructuring (-0.28p) and a further reduction in the value of the portfolio's public debt investments (-0.19p).

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

	pence per share
June NAV	99.28
Ex-div adjustment	-1.56
Adjusted opening NAV	97.72
Interest income, net of expenses	0.49
FX movements, net of hedges	-0.25
Increase in asset valuations	0.06
July NAV	98.02

Update on the effects of COVID-19 on the Portfolio

The Investment Adviser, the Investment Manager, and PWC, the independent valuation agent have continued analysing the effect of COVID-19 on the Company's portfolio which also includes a market benchmarking exercise to conclude on spread and yield adjustments for each of the investments.

In summary, the spread widening across the portfolio during the second half of March 2020 continued its reversal throughout July, with several of the Company's investments performing better than expectations throughout the lockdown. However, the gains from continued spread tightening have been partially offset by a slightly lower-than-expected equity valuation in the restructuring of Salt Creek Midstream.

The Salt Creek Midstream (SCM) restructuring closed on 13 July 2020. As a result of the restructuring, SEQI's existing opco and holdco debt were cancelled and replaced by a combination of new debt, preferred shares, common shares, and warrants as well as participations in two joint ventures. Sequoia expects material upside should crude oil prices and activity in the Permian basin recover materially.

Further Portfolio update

As at 31 July 2020, the Company had cash of £102.5m and had drawn £80.3m on its £280m Revolving Credit Facility. The Company also had undrawn commitments on existing investments collectively valued at £55.8m. As of 31 July 2020, the Company's invested portfolio comprised of 62 private debt investments and 12 infrastructure bonds across 8 sectors and 28 sub-sectors. It had an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 10.1% and a weighted average life of approximately 5.6 years. Private debt investments represented 94% of the total portfolio and 64% of the portfolio comprised floating rate assets. The weighted average purchase price of the Company's investments was 96.7% of par. Investments which are pre-operational represented 11.2% of total assets.

The Company's invested portfolio remains geographically diverse with 52% located across the US, 16% in the UK, 26% in Europe, and 6% in Australia/New Zealand. Currently the Company is not investing in Portugal or Italy but has selectively invested in opportunities in Spain. The Company's pipeline of economic infrastructure debt investments remains strong and is diversified by sector, sub-sector, and jurisdiction.

At month end, approximately 100% of the Company's NAV consisted of either Sterling assets or was hedged into Sterling. The Company has adequate resources to cover margin calls on its hedging book.

The Company's settled investment activities during July include:

·      A primary purchase of $45m American Tanker Inc's 7.75% 2025 bonds, which are backed by a ship finance company focused on the intercoastal U.S. Jones Act shipping market; and

·      An additional $1.5m loan to Bourzou Equity, a company created for a data centre in Virginia.

The following Company's investments were sold or prepaid in July:

·      $45m of American Tanker Inc's 9.25% 2022 bonds, which are backed by a ship finance company focused on the intercoastal U.S. Jones Act shipping market; and

·      A €23.0m loan to Mainsite Logistik Holding, a logistics service provider to market leading industrial companies in Germany.

Ordinary Portfolio Summary (15 largest settled investments)

Investment name	Currency	Type	Ranking	Value £m(1)	Sector	Sub-sector	Yield to maturity / worst (%)
AP Wireless Junior	EUR	Private	Mezz	61.9	TMT	Telecom towers	6.3
Hawaiki Mezzanine Loan	USD	Private	Mezz	51.6	TMT	Undersea cable	15.0
Expedient Data Centers Senior Secured 2026	USD	Private	Senior	49.0	TMT	Data centers	5.9
Terra-Gen Power TL B	USD	Private	Senior	43.8	Renewables	Solar & wind	7.6
Euroports 2nd Lien 2026	EUR	Private	Mezz	43.6	Transport	Port	8.8
Scandlines Mezzanine 2032	EUR	Private	HoldCo	42.7	Transport	Ferries	8.0
Hawkeye Solar HoldCo 2030 1, 2, and 3	USD	Private	HoldCo	41.2	Renewables	Solar & wind	8.2
Bizkaia TL 2021	EUR	Private	HoldCo	41.2	Power	Elec. generation	8.7
Bannister Senior Secured	GBP	Private	Senior	41.2	Accomm.	Health care	7.8
Jetpeaks HoldCo 2027	USD	Private	HoldCo	40.7	Power	Elec. generation	7.8
Adani Abbot HoldCo 2021	AUD	Private	HoldCo	40.2	Transport	Port	13.0
Tracy Hills TL 2025	USD	Private	Senior	40.2	Other	Residential infra	8.9
GenOn Bowline Senior Secured 2026	USD	Private	Senior	38.2	Power	Elec. generation	8.0
Warnow Tunnel	EUR	Private	Senior	37.4	Transport	Road	8.5
Corral HoldCo 2024	USD	Private	HoldCo	36.1	Other	Refinery	11.5

Note (1) - excluding accrued interest

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

LEI: 2138006OW12FQHJ6PX91

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

Neil Winward

Tulchan Communications (Financial PR)                                    +44 (0)20 7353 4200

Martin Pengelley

Elizabeth Snow

Deborah Roney

Praxis Fund Services Limited (Company Secretary)               +44 (0) 1481 755530

Matt Falla

Katrina Rowe                                                                                       

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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