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High-yielding Sequoia poised for £250m equity raise

12 February 2020

The infrastructure debt fund is looking for £250m to pay down debt while Gresham House's battery storage waits on planning permission before coming back to market.

Sequoia Economic Infrastructure Income (SEQI ), a high-yielding infrastructure debt fund, is hoping to raise £250m in its latest share issue and teases a rise in the dividend.

The £1.5bn Guernsey-listed fund, which is named after the giant redwood trees, plans to issue 223.2m shares at 112p each, which represents a 6.9% premium to the net asset value (NAV) but a 2.5% discount to Friday’s closing price of 114.8p.

The fund, which launched five years ago and has a yield of 5.4%, was among the largest issuers of shares by investment companies last year, raising £355.6m through two issues.

The money raised this time round will be used to pay down the £224m the fund has drawn from its £280m revolving credit facility. It also has £56.8m in cash.

Any money left over from the raise will be used to fund its near-term pipeline investment opportunities, which total over £380m. The company is also proposing a placing programme for a further 300m shares over the next 12 months.  

Chairman Robert Jennings said the fundraise follows ‘a successful period’; over one year the fund has delivered a NAV total return of 9.5% and the shares currently trade at a premium of 8.8%.

‘The board is encouraged by the NAV per share progression and by the quality and depth of our investment pipeline,’ he said.

The increase in the NAV allowed the fund to increase its dividend last year to 6.25p from 6p and Jennings said there could be a repeat this year.

‘If current trends continue, we will again review our target payout early in the coming financial year,’ he said. ‘This is appreciably sooner than we had previously expected.’

The Sequoia portfolio holds 69 private debt investments and 13 infrastructure bonds in investments across the US – which makes up the largest region in the portfolio at 44% - UK, Europe, and Australia and New Zealand.

GRID building

Sequoia is not the only fund in the alternatives sector going to market, as Gresham House Energy Storage fund (GRID ) has said it may seek £30m on the market to fund an development at a new acquisition, dependent on planning permission.

The energy storage investors recently purchased a 50MW battery storage facility in Kent. In an announcement to the stock market it said it has ‘identified the opportunity to add value to the project through the exploitation of currently unused spare grid capacity by building out a 10MW extension to the project’.

If it is granted planning permission, which the manager said is confident will happen, then the fund will look to raise £30m in ‘coming weeks’.

GRID raised £100m at IPO in November 2019 to provide energy storage systems to the National Grid and has a NAV target of 8% a year, including a 4.5p dividend last year rising to 7p this year. It currently trades at a 12% premium to NAV. 

 

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