Last checked at 
13 Nov 2015 07:00
13 November 2015
Sequoia Economic Infrastructure Income Fund Limited
Net Asset Value as at 30 October 2015 and Investment Update
As of the 30th October 2015, the Ordinary share class held 14 infrastructure bonds and 13 private debt investments, collectively valued at £137.3m including accrued interest, with an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 7.8% and a weighted average life across the acquired portfolio of approximately 6.8 years.
Acquisitions in October comprised a French Renewables HoldCo Loan (directly originated by Sequoia) and a bond issued by a Canadian waste management company, as well as additions to existing positions including a UK Waste company, Australian Rolling Stock and a US electricity generation loan.
In aggregate, the price of these 27 transactions represents approximately 94.5% of the Net Asset Value of the Company. The Company is now materially fully invested. The investments are across the UK, Western Europe, Australia, Canada and the US and include the road, rail, shipping, utility, elderly care and aircraft leasing sectors. The Company has not disposed of any investments since the IPO apart from participating in a tender for £1.6m of bonds, where the issuer bought the bonds back at par, resulting in a modest gain of circa 3%. The weighted average purchase price of the Company's acquired investments is less than 94% of par.
The decrease in the Company's NAV to 95.95p per share in the month arises through:
· Positive market movements, including marking investments purchased for the portfolio to the bid price, of 0.9p per share; plus
· Interest income net of expenses of 0.3p per share; less
· The cost of writing acquired assets to the bid price, of 0.2p; and
· FX losses, net of hedge movements, of 1.3p per share.
The Company is pleased to announce it raised a further £147m through a C share offering which closed on 2nd November 2015. As a result, the overall size of the Company has almost doubled.
Portfolio Summary
Ten largest investments
Transaction name | Currency | Type | Value £mm | % of NAV | Sector | Sub-sector | Yield to maturity / worst (%) | |
Ranking | ||||||||
Neoen Production 1 S.A.S.U | EUR | Private | HoldCo | 13.9 | 9.7% | Renewables | Solar & Wind | 7.00 |
Biffa TL A | GBP | Private | Senior | 11.7 | 8.1% | Utility | Waste | 6.78 |
Exeltium Mezzanine | EUR | Private | Mezz | 11.4 | 7.9% | Power | PPA | 8.50 |
Danaos Snr Secured 2018 | USD | Private | Senior | 8.6 | 6.0% | Transport assets | Shipping | 6.41 |
Dulles Greenway 2029 | USD | Public | Senior | 7.7 | 5.4% | Transport | Road | 6.82 |
North Las Vegas Water 6.572% 2040 | USD | Public | Senior | 7.0 | 4.9% | Utility | Water | 7.53 |
Global Ship Lease 10% 2019 | USD | Public | Senior | 6.5 | 4.5% | Transport assets | Shipping | 9.64 |
Invenergy TL B | USD | Private | Senior | 6.4 | 4.5% | Power | Electricity Generation | 6.63 |
Green Plains TL B | USD | Private | Senior | 6.4 | 4.5% | Other | Alternative fuel | 6.15 |
Ascendos Rail 2nd lien | EUR | Private | Mezz | 5.1 | 3.6% | Transport assets | Rail | 4.81 |
Sub- total / average | 84.9 | 59.0% | 7.12 | |||||
Positions outside top ten | 51.1 | 35.5% | 8.92 | |||||
Portfolio total / average | 135.9 | 94.5% | 7.79 | |||||
Market Summary
October showed some activity in the infrastructure debt sector with nine transactions closing across the UK and Western Europe. Notable deals included the £1.7bn financing for the Galloper UK Offshore Wind Farm and the €1.1bn notes issue for Autostrade Per L'Italia. In addition, Octopus Investments acquired a 522MW senior secured UK Solar portfolio for £400mm.
Senior secured infrastructure debt for core assets, particularly having availability payment mechanisms, continues to be aggressively bid with margins approaching +100 bps with both bank and institutional investors active. In demand driven transactions, the Fund has continued to see opportunities to achieve yields in excess of 7% in both primary originations and continued bank deleveraging.
Sterling strengthened materially against both the US dollar and the euro in October, with the dollar moving from $1.51 to $1.54 and the euro ending at €1.40 compared with €1.35 at the end of September.
US news flow was dominated by the Federal Reserve raising the likelihood of an interest rate hike in December. In Europe, rising speculation over ECB monetary stimulus with the hint of expanding the quantitative easing programme helped to boost corporate bond returns. The Bloomberg USD High Yield Corporate Bond Index rose by 3% over the month, following a sharp decline in September.
10-year US Treasury rates rose by approximately 11 bps to 2.14%. Euro term rates remained steady over the month with 10-year Bund yields unchanged at approximately 51 bps.
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).