Sequoia Econ Infra - NAV and Investment Update

The NAV for SEQI, the specialist investor in economic infrastructure debt, increased to 101.78p from the prior month's NAV of 101.34p. The changes in NAV arose primarily through:

·      Interest income net of expenses of 0.60p;

·      A decrease of 0.18p in asset valuations; and

·      An increase of 0.03p from FX movements.

During the month, the Company drew £55.7m on its Revolving Credit Facility which is expected to be deployed into its pipeline of investment opportunities. The Company's cash balance after deducting net borrowings of £55.7m was £14.3m, with total net assets of £1.1bn at month end. The Company also had undrawn commitments, and three additional investments in settlement, collectively valued at £188.6m.

The Company's invested portfolio comprised of 43 private debt investments and 20 infrastructure bonds across 8 sectors and 24 sub-sectors and had an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 8.8% and a weighted average life of approximately 5.4 years. Private debt investments represented 85.3% of the total portfolio and 65.4% of the portfolio comprised floating rate assets. The weighted average purchase price of the Company's investments was c. 97.1% of par. Investments which are pre-operational represented 15.9% of total assets.

The Company's invested portfolio remains geographically diverse with 48% located across the US, 15% in the UK, 28% in Europe, and 10% in Australia/New Zealand. Currently the Company is not investing in Portugal or Italy but has invested in selective opportunities in Spain. The Company's pipeline of economic infrastructure debt investments remains strong and is diversified by sector, sub-sector, and jurisdiction.

As at 31 December 2018, approximately 99% of the Company's NAV consisted of either Sterling assets or was hedged into Sterling. The Company has adequate resources to cover the cash costs associated with its hedging activities.

The Company's settled investment activities during December include:

·      A $35.7m initial primary disbursement to Epic Midstream, a midstream oil and gas company that is constructing two pipelines from the Permian Basin to Corpus Christi, Texas;

·      A $20m secondary purchase of General Electric's 5% perpetual bonds, an equipment manufacturer that is shifting its focus to the power, renewables, and aviation sectors;

·      An additional $10m secondary loan purchase of Midcoast Energy's TL B;

·      An additional $5m disbursement to Whittle Schools in Washington, D.C.;

·      An additional $5m secondary purchase of Terra-Gen's term loan maturing in 2021;

·      An additional €2m primary investment in Hatch Student Housing in Ireland;

·      An additional €1.7m secondary purchase of Ziton's variable rate 2021 bonds;

·      An additional £650k secondary purchase of Voyage Care 5.875% 2023 bonds;

·      An additional NOK1.0m secondary purchase of Exmar variable rate 2019 bonds.

No investments were sold, called, or prepaid during December.

Ordinary Portfolio Summary (15 largest settled investments)

Investment name

Currency

Type

Ranking

Value £m(1)

Sector

Sub-sector

Yield to maturity / worst (%)

 

 

 

 

 

 

 

 

Hawaiki Mezzanine Loan

USD

Private

Mezz

55.5

TMT

Undersea cable

11.8

Salt Creek Midstream

USD

Private

Senior

54.9

Utility

Midstream

8.0

Tracy Hills TL 2025

USD

Private

Senior

47.1

Other

Residential infra

10.5

Scandlines Mezzanine 2032

EUR

Private

HoldCo

44.9

Transport

Ferries

6.5

Bannister Senior Secured

GBP

Private

Senior

42.0

Accomm.

Health care

7.9

Adani Abbot HoldCo 2021

AUD

Private

HoldCo

41.4

Transport

Port

9.2

Bizkaia TL 2021

EUR

Private

HoldCo

37.0

Power

Elec. generation

7.7

Aquaventure

USD

Private

Senior

35.3

Utility

Water

8.3

Project Warsaw

EUR

Private

Senior

32.2

Renewables

Solar & wind

5.9

Sunrun Hera 2017-B

USD

Private

Mezz

31.4

Renewables

Solar & wind

7.5

Seaport TL B

USD

Private

Senior

31.2

Transport

Port

8.4

Sacramento Data Centre

USD

Private

Senior

28.6

TMT

Data centers

11.0

Epic Midstream

USD

Private

Senior

28.0

Utility

Midstream

8.4

Abteen Ventures

USD

Private

Senior

27.7

TMT

Data centers

5.0

EIF Van Hook TL B 2024

USD

Private

Senior

26.2

Utility

Midstream

8.8

Note (1) - excluding accrued interest

Market Summary

A total of 59 project finance transactions closed in December throughout the Company's eligible jurisdictions, worth $22.6bn in aggregate. Notable transactions during the month include:

·      A £1.4bn refinancing of the Dugeon offshore wind farm in the United Kingdom;

·      CAD 239m PPP for the redevelopment of the Rutherford GO station in Ontario, Canada;

·      A €250m revolving facility for TDF, an internet network services provider in France.

In the US, rising interest rates and trade tensions with China continued to weigh on investor confidence at the end of 2018. Global growth concerns were compounded by hawkish comments from the Federal Reserve which would further stress an already-stretched credit market in the US, particularly in the leveraged loan space. Rate rises are contributing to a strengthening Dollar, especially against the Pound, ending the month at 1.2746 GBP/USD. 

UK retail sales were higher in November on the back of Black Friday sales, but fell in December after a weak Christmas period as Brexit continues to impact consumer confidence. Mark Carney also presented a bearish assessment of the Brexit uncertainty which eroded any upside for the Pound.

Lastly, Italy's populist government agreed to delay some planned expenditures, thus ending a long-running disagreement with the EU over the feasibility of Italy's proposed budget. European markets responded positively to this development but are still cautious regarding the eurozone's vulnerability to slowing growth and economic problems in China and other emerging markets. GBP ended the month down 1.3% against the Euro at 1.1130.

The Company's monthly investor report and additional portfolio disclosure will be made available at http://www.seqifund.com/.                                                                                         

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.

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