(Alliance News) - Sequoia Economic Infrastructure Income Fund Ltd on Wednesday noted investee Salt Lake Potash Ltd has announced a voluntary administration after an unsuccessful equity raise.
AIM listing Salt Lake was looking to raise cash to further its Lake Way potash project in Australia.
"The proposed equity raise has been unsuccessful and Salt Lake Potash have announced a voluntary administration of the company as at 20 October 2021," FTSE 250-listed Sequoia Economic said.
Sequoia's investment in Salt Lake represented 1.9% of its net asset value on September 30.
Sequoia added: "The investment adviser had been developing a contingency plan should the funding gap not be addressed. This contingency plan has now been activated in full alignment with the lender group. The lender group has appointed KordaMentha, a leading Australian restructuring and advisory firm, as receivers for the lender group."
Martin Jones, Tom Birch and Hayden White of KPMG have been named as voluntary administrators.
Under Australian laws, the receivers KordaMentha act for the benefit of a company's lenders. They may undertake trade sales, debt recovery or other restructuring work.
Salt Lake's receivers said they will "commence a process to market the company and its assets for sale and recapitalisation opportunities in the coming weeks".
Sequoia noted that the total amounted invested in the Lake Way project "materially exceeds" the debt. However, the investor noted a similar potash project with similar ramp-up issues to Lake Way recently achieved full production.
The voluntary administrators, meanwhile, on Wednesday said Salt Lake's director resolved that the company was insolvent or likely to become insolvent "at some future time".
Sequoia added: "Whilst it is too early and speculative to comment on the eventual recovery percentage of our investment, our senior secured position should position us strongly in the restructuring process."
Sequoia shares were 0.2% lower at 108.97 pence each in London on Wednesday morning. Salt Lake shares were suspended on Tuesday, they were last quoted at 2.25 pence.
Salt Lake on Tuesday said it was working towards finalising a fundraising plan "that would be necessary to continue operations".
By Eric Cunha; ericcunha@alliancenews.com
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Sequoia Economic Infrastructure Fund (SEQI)