Last checked at 
12 Aug 2016 07:00
12 August 2016
Sequoia Economic Infrastructure Income Fund Limited
Net Asset Value as at 29 July 2016 and Investment Update
Ordinary Share update
As of the 29th July 2016, the Ordinary Share class held 12 infrastructure bonds and 17 private debt investments, collectively valued at £296.5m including accrued interest, with an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 8.6% and a weighted average life across the acquired portfolio of approximately 5.3 years.
Approximately half of the Ordinary Share class portfolio comprised of floating rate assets, with only four LIBOR floors (other than those at zero percent). As such the portfolio's yield is likely to increase over time if LIBOR increases.
The investments are diverse across the UK, Western Europe, Australia, Canada and the US and include a wide range of asset types including road, rail, utility, power, shipping, renewables and aircraft leasing.
In July, the Company sold its positions in Enable Midstream Partners 2019, Enable Midstream Partners 2024 and Columbia Pipeline Gas 2045 bonds at a significant premium which can be attributed to improving company performance and rallying oil prices. These resulted in holding period returns of approximately 38%, 24% and 41% respectively. The Enable positions were held for c. 5 months, and the Columbia bonds were held for c. 4 months.
The Ordinary Share NAV fell to 100.78 (ex-div) from 101.16p per share, primarily through:
· Interest income net of expenses of 0.36p;
· A gain of 0.59p on net FX movements;
· A gain of 0.18p in asset valuations; and
· A dividend declaration of 1.50p.
Ordinary Portfolio Summary (10 largest settled investments)
Transaction name | Currency | Type | Ranking | Value £mm(1) | Sector | Sub-sector | Yield to maturity / worst (%) |
A'lienor S.A.S. (A65) | EUR | Private | Senior | 31.1 | Transport | Road | 5.52 |
Infinis Bridge | GBP | Private | HoldCo | 23.8 | Renewables | Solar & Wind | 11.74 |
Exeltium Mezzanine | EUR | Private | Mezz | 18.9 | Power | PPA | 9.15 |
Danaos Snr Secured 2018 | USD | Private | Senior | 17.9 | Transport assets | Shipping | 12.96 |
Neoen Production 1 S.A.S.U | EUR | Private | HoldCo | 16.5 | Renewables | Solar & Wind | 6.99 |
IO Data Centers LLC | USD | Private | Senior | 15.0 | TMT | Data Centres | 8.16 |
Biffa TL A | GBP | Private | Senior | 12.9 | Utility | Waste | 6.93 |
GFL 9.875% 2021 | USD | Public | Senior | 12.3 | Utility | Waste | 7.16 |
Green Plains TL B | USD | Private | Senior | 10.8 | Other | Alternative Fuel | 8.39 |
Reliance Rail Finance 2018 | AUD | Private | Senior | 10.6 | Transport assets | Rolling Stock | 6.84 |
Note (1) - excluding accrued interest
C Share update
As of the 29th July 2016, the C Share class held 2 infrastructure bonds and 4 private debt investments. These assets are collectively valued at £68.1m including accrued interest, with an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 7.7% and a weighted average life across the acquired portfolio of approximately 4.1 years.
Investments in July include:
· Longview Power Term Loan B, a US electricity generation company
· A senior loan to AP Wireless Infrastructure, a cell site lease investment firm
· An incremental investment in Talen Energy Supply, a US power and electricity generation company
In addition, the C Share class had one bond and one private debt position in the process of settlement, with an aggregate value of £27.0m.
The Investment Adviser continues to see attractive opportunities for the deployment of capital into economic infrastructure debt, and expects the overall yield on the C Share portfolio to be 8% or higher as the fund becomes more fully invested.
The C Share NAV rose from 98.12 to 98.58p, primarily through:
· A gain of 0.09p on net FX movements;
· A 0.29p gain from market movements; and
· Interest income net of expenses of 0.08p.
Market Summary
July saw little activity in the sector, with only two infrastructure projects reaching financial close across the UK and Western Europe. This comprised the £340m financing of the 43MW Kemsley EfW CHP plant in Kent, UK. In addition, the Dalaman airport reached financial close on a €232mm facility which will be used for privatisation.
The Bank of England announced their willingness to further loosen monetary policy in an effort to mitigate the impact of Brexit on the British economy.
Eurozone unemployment beat expectations with German unemployment falling and Spanish unemployment achieving a 17-year low.
In July, Sterling's fall from Brexit against the US Dollar was mitigated by the Fed leaving rates unchanged, resulting in Sterling ending the month at $1.32.
Additionally, Sterling remained flat against the Euro, ending the month at €1.19.
Over the month, the Bloomberg USD High Yield Corporate Bond Index rose from 159 to 162.
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).