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(Alliance News) - Sequoia Economic Infrastructure Income Fund Ltd on Friday said it has been developing plans with an unnamed borrower to maximise recovery of a loan for its Clyde Street hotel investment, while expecting a USD25 million cash distribution from its Bulb Energy investment.
For Clyde Street, the London-based income fund, also known as SEQI, said its investment advisor has successfully petitioned at court to appoint specialists from Interpath Advisory to act as interim managers and subsequently administrators to "optimise the asset realisation process and to secure the working capital necessary for its operations in the interim".
SEQI has a senior secured interest in the Clyde Street hotel in Glasgow, opening in late August following a "challenging" construction period during the pandemic. Since then, SEQI said it has been "ramping up" with growing occupancy, but a portion of the hotel remains unavailable subject to internal fit-out.
SEQI said its investment advisor has been exploring options for addressing ongoing funding requirements for the hotel while developing loan recovery plans.
The investment advisor will be taking a "conservative" view on value and a downward valuation adjustment will be applied to this position in its next monthly factsheet, SEQI said, with the ultimate recovery and net asset value impact depending on the outcome of the administration process. The total position of the Clyde Street hotel represented around 3.1% of SEQI's NAV on October 31.
SEQI said it expects the positive impact on NAV from Bulb Energy to materially offset negative movements for the Clyde Street hotel.
Following a confidential mediation process and a partial settlement of claims with Bulb Energy's administrators, SEQI said expects to receive GBP25 million as a cash distribution from Bulb. Of which GBO9 million is expected shortly and a further GBP16 million is expected in or shortly after September 2024, conditional on criteria which SEQI expects to meet.
SEQI said, in certain limited circumstances, the latter amount may be deferred until or shortly after September 2025. However, if that occurs, the deferred amount will increase to GBP18.4 million.
This will take the total recoveries from the defaulted loan to Bulb to GBP50.3 million, compared to GBP55 million, which was the principal amount outstanding when the special administration took effect.
SEQI said the recovered amount is comprised of GBP39 million in cash and GBP11.3 million in shares of Zoa Technologies, a software company set up to redevelop Bulb's consumer technology platform and licence it to energy supply companies in the UK and elsewhere.
It added that realisation of value from SEQI's majority stake in Zoa will be dependent on Zoa's business performance and any future fundraise.
Further distributions are expected over time from Bulb's parent company Simple Energy, which SEQI said it will update investors on progress on this. It is also possible that there may be further distributions by Bulb over time.
Shares in Sequoia Economic were up 0.7% to 82.87 pence each in London on Monday morning.
By Greg Rosenvinge, Alliance News senior reporter
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