NOT FOR RELEASE, PUBLICATION
OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO THE UNITED
STATES
16
April 2024
Sequoia Economic Infrastructure Income Fund
Limited
("SEQI" or the "Company")
Monthly NAV and portfolio update
The NAV per share for SEQI, the
specialist investor in economic infrastructure debt, increased to
93.77 pence per share from the prior month's NAV per share of 93.44
pence, representing an increase of 0.33 pence per share.
A full attribution of the changes in
the NAV per share is as follows:
|
pence per
share
|
29
February 2024 NAV
|
93.44
|
Interest income, net of
expenses
|
0.76
|
Asset valuations, net of FX
movements
|
-0.52
|
Accretion from share
buyback
|
0.09
|
31
March 2024 NAV
|
93.77
|
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
During March 2024, central banks
across the UK, US and Eurozone maintained policy rates
at 5.25%, 5.50% and 4.00%, respectively.
Government bond yields declined across the UK and the Eurozone by
approximately 0.2% and 0.1% respectively and were broadly flat in
the US during the same period. Although inflation has fallen 60%
from its peak in June 2022, CPI inflation still exceeded
expectations in the US during March 2024 and increased to 3.5% over
the year, up from 3.2% in February 2024. In the UK, the latest
figures for February showed that inflation fell to 3.4% for the
year - the lowest level for almost two and a half years. In the
Eurozone, inflation also dropped to 2.4% in March 2024 from 2.6%
the previous month.
The market is still pricing in rate
cuts during Autumn this year, with base rates expected to fall by
up to 0.5% during the second half of 2024. Central banks predict
that the target inflation rate of 2.0% will be met by the US and
Eurozone in 2024 and in early 2025 in the UK.
As inflation is abating, energy
markets are normalising and interest rates appear to be at their
peak levels, the Investment Adviser believes that these stabilising
macro-economic themes provide a foundation for steadier credit
markets, and the long-term outlook on inflation and base rates
points towards a beneficial tailwind to the Company's NAV, as
falling rates would typically increase asset valuations.
Share buybacks
The Company bought back 11,792,899
of its ordinary shares at an average purchase price of 81.53 pence
per share in March 2024. The Company first started buying shares
back in July 2022 and has bought back 142,754,724 ordinary shares
as of 31 March 2024 with the buyback continuing into April 2024.
This share repurchase activity continues to contribute positively
to NAV accretion while investing in its own diversified portfolio.
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 £98.17 million, compared to undrawn
investment commitments of £54.7 million. The Company's revolving
credit facility (RCF) of £325 million is also undrawn. The
Company's policy in the current environment 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.
As at 31 March 2024, 58.6% of the
portfolio comprised of senior secured loans and 50.8% remained in
defensive sectors (renewables, digitalisation, utility and
accommodation). The Company's invested portfolio consisted of
53 private debt investments and 2 infrastructure bonds,
diversified across 8 sectors and 30 sub-sectors. It had
an annualised yield-to-maturity (or yield-to-worst in the case
of callable bonds) of 10.02% and a cash yield of 7.6% (excluding
deposit accounts). The weighted average portfolio life remains
short and is approximately 3.9 years. This short duration means
that as loans mature, the Company can take advantage of higher
yields in the current interest rate environment.
Private debt investments represented
96.9% of the total portfolio, allowing the Company to capture
illiquidity yield premiums. The Company's invested portfolio
currently consists of 42.1%[1] floating rate
investments and remains geographically diversified with
52.9% located across the USA, 24.7% in the UK, 22.3% in
Europe, and 0.1% in Australia/New Zealand. As at 31 March
2024, the positive effect of pull-to-par is estimated to be worth
approximately 4.1p per share over the course of the life of the
Company's investments.
The portfolio remains highly
diversified by sector and size, with the average loan representing
about 1.6% of the total portfolio and the largest 4.4% of NAV as at
March 2024.
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.
Settled investments
SEQI continues to carefully
scrutinise new investment opportunities in a disciplined manner
alongside other uses of proceeds such as share buybacks and
ensuring it has adequate liquidity on its RCF. Aside from these
uses of capital, the following investments settled in March 2024
(excluding small loan drawings of less than £0.5
million):
• An additional senior loan for
$16.8 million to Rand Parent LLC (Atlas Air), a NY-based global
operator in the airfreight transportation services sectors. The
yield-to-worst on this loan is 8.7% as of March 2024.
No
significant investments (exceeding £0.5 million) sold or repaid in
March 2024
Non-performing loans
The Investment Adviser continues to
actively manage its non-performing loans with the loans being
independently marked to market by PwC as part of the monthly
valuation process. Further updates will be provided to shareholders
in the future when material developments occur.
Portfolio Summary (15 largest settled
investments)
Investment name
|
Currency
|
Type
|
Ranking
|
Value
£m(2)
|
Sector
|
Sub-sector
|
Cash-on-cash yield
(%)
|
Yield to maturity/worst
(%)
|
Infinis Energy
|
GBP
|
Private
|
Senior
|
60.6
|
Renewables
|
Landfill
gas
|
5.36
|
6.11
|
AP Wireless Junior
|
EUR
|
Private
|
Mezz
|
59.9
|
Digitalisation
|
Telecom
towers
|
4.49
|
7.65
|
Project Sienna
|
GBP
|
Private
|
Senior
|
56.6
|
Other
|
Waste-to-energy
|
9.79
|
9.86
|
Workdry
|
GBP
|
Private
|
Senior
|
56.1
|
Utility
|
Utility
Services
|
8.94
|
8.93
|
Hawkeye Solar
|
USD
|
Private
|
HoldCo
|
52.3
|
Renewables
|
Solar
& wind
|
8.89
|
9.84
|
Project Tyre
|
USD
|
Private
|
Senior
|
52.0
|
Transport
- vehicles
|
Specialist shipping
|
11.13
|
10.95
|
Expedient
|
USD
|
Private
|
Senior
|
51.5
|
Digitalisation
|
Data
centers
|
10.95
|
10.95
|
Roseton
|
USD
|
Private
|
Senior
|
50.8
|
Power
|
Other
Electricity Generation
|
10.32
|
10.32
|
Kenai HoldCo 2024
|
EUR
|
Private
|
HoldCo
|
49.7
|
Power
|
Base
load
|
0.00
|
11.37
|
Sacramento Data
|
USD
|
Private
|
Senior
|
44.2
|
Digitalisation
|
Data
centers
|
7.42
|
8.66
|
Project Nimble
|
EUR
|
Private
|
HoldCo
|
43.5
|
Digitalisation
|
Data
centers
|
8.61
|
11.40
|
Euroports
|
EUR
|
Private
|
Mezz
|
42.8
|
Transport
- systems
|
Port
|
11.68
|
11.68
|
Scandlines
|
EUR
|
Private
|
HoldCo
|
41.9
|
Transport
- systems
|
Ferries
|
6.63
|
6.93
|
Tracy Hills TL 2025
|
USD
|
Private
|
Senior
|
40.7
|
Other
|
Residential infra
|
11.83
|
11.82
|
Project Shark
|
CHF
|
Private
|
HoldCo
|
39.5
|
Digitalisation
|
Data
centers
|
8.99
|
8.99
|
|
|
|
|
|
|
|
|
|
Note (2) - 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
|
|
|
Anurag Gupta
|
|
|
Matt Dimond
|
|
|
|
|
|
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.