04 December 2023
Sequoia Economic Infrastructure Income Fund, the specialist investor in economic infrastructure debt, provides an update on its investments in Clyde Street and Bulb Energy.
Clyde Street
SEQI has a senior secured interest in a hotel in Clyde Street, Glasgow, Scotland. The hotel substantially opened in late August 2023 following a challenging construction period throughout the pandemic. Since then, it has been ramping up with growing occupancy however, a portion of the hotel remains unavailable, subject to internal fit-out.
The Investment Adviser has been working with the Borrower to develop plans to maximise recovery of the loan, while exploring options for addressing ongoing funding requirements. After considerable efforts to find a solution, the Investment Adviser has successfully petitioned the Court to appoint specialists from Interpath Advisory to act as Interim Managers and subsequently Administrators to optimise the asset realisation process and to secure the working capital necessary for its operations in the interim.
The Investment Adviser will be taking a conservative view on value and a downward valuation adjustment will be applied to this position, to be published in the next monthly factsheet. The ultimate recovery and Net Asset Value (NAV) impact (total position represented c3.1% of NAV as at 31 October 2023) will depend on the outcome of the administration process.
The Investment Adviser is expecting the positive impact on NAV from Bulb Energy, as described below, to materially offset negative movements in this position.
Bulb Energy (“Bulb”)
Following a confidential mediation process and a partial settlement of claims with the Joint Energy Administrators of Bulb, SEQI expects to receive a distribution of £25 million in cash from Bulb. Of this amount, £9 million is expected shortly, and a further £16 million is expected (conditional on criteria which the Company expects to be met) in or shortly after September 2024. In certain limited circumstances, the latter amount may be deferred until or shortly after September 2025, although if that occurs the amount will increase from £16 million to £18.4 million.
The distribution will take the total recoveries from the defaulted loan to Bulb to £50.3 million, compared to the principal amount outstanding at the time the Special Administration took effect of £55 million. The recovered amount is comprised of £39 million in cash and £11.3 million in shares of Zoa Technologies Ltd (“Zoa”), a software company set up to redevelop Bulb’s consumer technology platform and licence it to energy supply companies in the UK and elsewhere. Realisation of value from the Company’s majority equity stake in Zoa will be dependent on Zoa’s business performance and any future fundraise.
Further distributions are expected over time from Simple Energy (the parent of Bulb) and the Company will update investors on progress on this. It is also possible that there may be further distributions by Bulb over time.
Steve Cook, Director and Head of Portfolio Management of the Investor Adviser commented:
“Our experience is that restructuring or work-out phases like Clyde Street take time, however we will continue to work to ensure a fair outcome for all parties.
“On our loan to Bulb, it has indeed taken time, with a complicated two-year process to reach a resolution in a most difficult situation for all parties. We are pleased that we now expect to recover a large proportion of the loan owed by Bulb. Although lengthy, this successful process demonstrates the defensive nature of infrastructure assets with strong recovery potential for lenders.”
For further information, please contact:
| Sequoia Investment Management CompanySteve CookRandall SandstromAnurag Gupta | +44 (0) 20 7079 0480 |
| Jefferies International Limited (Corporate Broker & Financial Adviser)Gaudi Le RouxStuart Klein | +44 (0) 20 7029 8000 |
| Vico Partners (Communications Adviser)John Sunnucks | jsunnucks@vicopartners.com |
| Sanne Fund Services (Guernsey) Limited (Company Secretary)Matt FallaLisa Garnham | +44 (0) 20 3530 3107 |