NOT FOR RELEASE, PUBLICATION
OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO THE UNITED
STATES
Sequoia Economic Infrastructure Income Fund
Limited
("SEQI" or the "Company")
Monthly NAV and portfolio update - January
2025
The NAV per share for SEQI,
the largest LSE
listed infrastructure debt fund,
increased to 94.19 pence per share from the prior month's NAV per
share of 93.19 pence, (being the 31 December 2024 cum-income NAV of
94.91 less the dividend of 1.71875 pence per share declared in
respect of the quarter ended 31 December 2024 and payable on 28
February 2025), representing an increase of 1.00 pence per
share.
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pence per
share
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31
December NAV
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94.91
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Interest income, net of
expenses
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0.72
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Asset valuations, net of FX
movements
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0.24
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Subscriptions / share
buybacks
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0.04
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Dividend
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-1.72
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31
January NAV
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94.19
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No
expected material FX gains or losses as portfolio is 100% currency-hedged. However, the Company's
NAV may include unrealised short-term FX gains or losses, driven by
differences in the valuation methodologies of its FX hedges and the
underlying investments - such movements will typically reverse over
time.
Well positioned to benefit from high interest
rates; 59.0% of portfolio is in
fixed rate investments as of January 2025, and 52.7% of the
portfolio is invested in Defensive sectors (Renewables,
Digitalisation, Utilities and Accommodation).
Market Summary - January 2025
Tariff Impact & Geopolitical
Analysis
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On 3 February 2025, the US announced
25% tariffs on most goods imported from Mexico and Canada and 10%
on Canadian energy, effective from 4 March 2025. They also
announced tariffs on goods imported from China, which came into
effect on 4 February 2025. China has retaliated with its own
tariffs, which took effect on 10 February 2025. These include a 15%
tariff on US coal and liquefied natural gas products, and a 10%
tariff on crude oil, agricultural machinery and large engine cars.
The EU and Canada have also vowed to take retaliatory measures
immediately if the US imposes its tariffs next month.
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While the immediate market reactions
to President Trump's tariff proposals have been relatively muted,
the Investment Adviser expects long-term tariffs to risk global
growth and to add some inflationary pressures in the US, UK and
Eurozone. The Investment Adviser is also
following the geopolitical events closely and remains cognisant of
the emerging risks in this area and will respond as and when the
situation becomes clearer.
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Interest rate announcements, inflation data and asset
valuations
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Economic indicators across all three
regions point to slow but steady growth, with inflation moderating
but still above central bank targets.
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During January 2025, The European
Central Bank ("the ECB") reduced interest rates by 0.25% to 2.75%
in a widely expected move, which marks the fourth consecutive rate
cut in the Eurozone. The Federal Reserve ("the Fed") kept rates
steady at 4.50% during its January 2025 meeting, pausing its
rate-cutting cycle after three consecutive reductions in 2024 that
totalled a full percentage point. The Bank of England ("the BoE")
made no changes to its policy rate during January 2025 but reduced
it by a further 0.25% to 4.50% on 6 February 2025, its lowest level
for 18 months.
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5-year government bond yields and
credit spreads remained broadly flat during January 2025, as the
rate cuts by the BoE and the ECB were largely anticipated by
financial markets and therefore priced in, minimizing the immediate
impact on bond yields. Geopolitical risks and concerns about global
economic growth also supported demand for government bonds, keeping
their yields stable.
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The valuation of most of SEQI's
fixed rate instruments increased during the month as the impact of
a marginal increase in base rates was more than offset by the
pull-to-par effect. The portfolio pull-to-par, which is incremental
to NAV as loans mature, is 3.8 pence per share as of January
2025.
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The Investment Adviser expects
inflation to ease during 2025 as energy prices stabilize and supply
chains improve. Although President Trump's tariffs could introduce
inflationary pressures in the short-term, a downward trend toward a
lower interest rate environment is expected to prevail over time,
which is supportive of current fixed-rate loans and bond
positions.
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As inflation gradually abates in the
long run, the likelihood of future interest rate cuts increases
(although slightly more hawkish in the US), which makes alternative
investments such as infrastructure more attractive when compared to
liquid debt. While the pace and size of interest rate cuts will
vary across the Company's different investment jurisdictions, the
general consensus remains one of declining interest rates
throughout the year.
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Portfolio update - January 2025
Revolving Credit Facility and cash holdings
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The Company is undrawn on its
revolving credit facility (RCF) of £300.0 million and currently has
cash of £60.6 million (inclusive of interest income), and undrawn
investment commitments of £137.7 million.
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The RCF is primarily utilised to
manage cashflows through the timing of new investments against the
repayment of existing investments.
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Portfolio Composition
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The Company's invested portfolio
consisted of 53 private debt investments and 5 infrastructure
bonds, diversified across 8 sectors and 30 sub-sectors.
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59.3% of the portfolio comprised of
senior secured loans ensuring defensive positioning.
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It had an annualised
yield-to-maturity (or yield-to-worst in the case of callable bonds)
of 9.73% and a cash yield of 7.21% (excluding deposit accounts).
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The weighted average portfolio life
decreased marginally to 3.4 years. This short duration means that
as loans mature, the Company can take advantage of higher yields in
the current interest rate environment.
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Private debt investments represented
90.3% of the total portfolio, allowing the Company to capture
illiquidity yield premiums.
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The Company's invested portfolio
currently consists of 41.0% floating rate investments and remains
geographically diversified with 47.2% located across the USA, 24.6%
in the UK, 28.1% in Europe, and 0.1% in Australia/New
Zealand.
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Portfolio highly diversified by sector and
size
Share buybacks
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The Company bought back 3,637,250 of
its ordinary shares at an average purchase price of 78.20 pence per
share in January 2025.
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The Company first started buying
back shares in July 2022 and has bought back 204,939,417 ordinary
shares as of 31 January 2025, with the buyback continuing into
February 2025. This share repurchase activity by the Company
continues to contribute positively to NAV accretion.
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New
investment activity during January 2025
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Senior loan to Grange Backup Power
Ltd for €11.9 million. The borrower is an Irish power asset linked
to a data centre. The YTM on this loan is 9.02%.
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One additional loan to Tracy Hills
Holdings Company LLC Facility B for $5.0 million to finance the
separate revolving credit facility. Tracy Hills is a residential
infrastructure project in California. The YTM on this loan is
10.86%.
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No investments repaid during January
2025
Non-performing loans
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The 4000 Connecticut loan (formerly
Whittle Schools) is currently classified as non-performing and is
under active monitoring. Since the borrower gained vacant
possession of the property in late 2023, the Investment Adviser has
been working closely with the borrower and other lenders to
facilitate the re-leasing of the property. To support these
efforts, the lenders agreed to an extension of the loan, which was
originally set to mature in February 2025. Since then, the lenders
have maintained active engagement with the borrower regarding the
re-leasing process and are evaluating several strategic options for
the loan. These options include, but are not limited to, extending
the loan tenor further, selling the loan, or pursuing foreclosure.
We are actively monitoring the valuation and will provide further
updates as progress is made.
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There are no updates on the
remaining non-performing loans in the portfolio.
Top
Holdings
Valuations are independently
reviewed each month by PWC.
Full list of SEQI's Portfolio
Holdings and SEQI Monthly Factsheet:
http://www.rns-pdf.londonstockexchange.com/rns/2607X_2-2025-2-16.pdf
http://www.rns-pdf.londonstockexchange.com/rns/2607X_1-2025-2-16.pdf
About Sequoia Economic Infrastructure Income Fund
Limited
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SEQI is the UK's largest listed debt
investor, investing in economic infrastructure private loans and
bonds across a range of industries in stable, low-risk
jurisdictions, creating equity-like returns with the protections of
debt.
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It seeks to provide investors with
regular, sustained, long-term income with opportunity for NAV
upside from its well diversified portfolio. Investments are
typically non-cyclical, in industries that provide essential public
services or in evolving sectors such as energy transition,
digitalisation or healthcare.
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Since its launch in 2015, SEQI has
provided investors with nine years of quarterly income,
consistently meeting its annual dividend per share target, which
has grown from 5p in 2015 to 6.875p per share in 2023.
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The fund has a comprehensive ESG
programme combining proprietary ESG goals, processes and metrics
with alignment to key global initiatives
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SEQI is advised by Sequoia
Investment Management Company Limited (SIMCo), a long-standing
investment advisory team with extensive infrastructure debt
origination, analysis, structuring and execution
experience.
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SEQI's monthly updates are available
here: Monthly Updates - seqi.fund/investors/monthly-updates
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For
further information please contact:
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Investment
Adviser
Sequoia Investment Management Company
Limited
Steve Cook
Dolf Kohnhorst
Randall Sandstrom
Anurag Gupta
Matt Dimond
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+44
(0)20 7079 0480
pm@seqimco.com
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Brokers
Jefferies International Limited
Gaudi Le Roux
Harry Randall
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+44
(0)20 7029 8000
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Public
Relations
Teneo (Financial PR)
Martin Pengelley
Elizabeth Snow
Faye Calow
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+44
(0)20 7260 2700
sequoia@teneo.com
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Administrator / Company
Secretary
Apex Fund and Corporate Services
(Guernsey) Limited
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+44
(0) 20 3530 3107
Admin.Sequoia@apexgroup.com
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This announcement is not for
publication or distribution, directly or indirectly, in or into the
United States of America. This announcement is not an offer of
securities for sale into the United States. The securities
referred to herein have not been and will not be registered under
the U.S. Securities Act of 1933, as amended, and may not be offered
or sold in the United States, except pursuant to an applicable
exemption from registration. No public offering of securities
is being made in the United States
