Bond market turmoil has not dimmed investor enthusiasm for Sequoia Economic Infrastructure as high-yielding debt fund raises £50 million more than it sought in share issue.
Bond market turmoil has not dimmed investor enthusiasm for Sequoia Economic Infrastructure (SEQI) with the high-yielding debt fund raising £253 million in an over-subscribed share issue.
The £1 billion Guernsey-based investment company had sought to raise £200 million but such was the strength of demand it has increased the issue by 50 million shares. Even so the 5.6% yielding fund has had to scale back some investors’ applications.
It will now issue over 238 million new shares at 106p with trading expected to start on Friday. The money will be used to repay its £116 million overdraft and fund an investment pipeline of over £300 million.
Chairman Robert Jennings said: ‘2018 has been a significant year for SEQI as we reached our three-year track record and following this equity issue we will be able to increase the value of our invested assets to over £1.2 billion.
‘We are very appreciative of the support shown by both existing and new shareholders over the past three years, which is a strong endorsement of our strategy.’
This is SEQI’s sixth over-subscribed share issue since it floated in 2015. Part of its appeal is it holds over three quarters of its assets in floating rate loans. Their income increases as interest rates rise, shielding the portfolio from the current sell-off in bond markets provoked by the US Federal Reserve hiking its funds rate three times this year and signalling its appetite for further monetary tightening.
SEQI offers a diversified, global portfolio with loans to 58 infrastructure projects in sectors such as transport, energy and utilities in North America (42%), Europe (29%), UK (17%) and Australia-New Zealand (112%).
The successful fund raise pleased the market as it boosts SEQI’s firepower and ability to generate more income for its quarterly dividends. The shares, which yesterday closed at a 5% premium above net asset value, rose 3.3% or 3.5p to 109.5p.
It comes amid a relatively buoyant market for investment company fund raising with £2.11 billion of new shares issued in the third quarter. This was up from £1.82 billion in the second quarter although the total of £5.49 billion for the first nine months of the year has slumped 35% from £8.44 billion for the same period in 2017, according to Numis Securities.