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Sequoia takes Bulb hit

Sequoia Economic Infrastructure’s NAV fell by 0.6p over November. It has updated on the problems at Bulb and its parent company Simple.

Bulb Energy Ltd (“Bulb”) entered into the Special Administration Regime (“SAR”) on 24th November and its parent company, Simple Energy Ltd (“Simple”) entered into normal administration on the same day. The primary objective of the SAR is to ensure continuity of energy supply to customers, and, in this regard, the Investment Adviser has been working openly and constructively with all stakeholders to ensure the best interests of customers, employees and creditors.

During the SAR, the fund is unable to enforce its senior security over the assets of Bulb (which more than cover the amount of the Company’s loan) and the capital provided by the Government to Bulb, to cover ongoing operating losses and achieve the Government’s wider policy objectives, will (at least in part) rank ahead of the Company’s loan. The Government and the special administrators are yet to disclose whether they have a plan for Bulb’s exit from the SAR and therefore it is not possible to assess the level of funding the Government will have provided by the end of the SAR. Consequently, the decision to put Bulb into the SAR means that the Investment Adviser is not currently able with confidence to ascribe any value to the assets of Bulb over which it has security and accordingly it is currently assuming that these will have no value at all after repayment of the Government’s capital. The Investment Adviser notes that, had a Supplier of Last Resort process been adopted, it would have expected full repayment of its loan in a relatively timely manner. The Investment Adviser is working closely with advisers to understand if due process was followed in relation to the appointment of the Special Administrator and in ruling out a supplier of last resort arrangement among other matters.

As previously noted, the Company’s loan to Bulb is guaranteed by, and secured on, the substantial assets of Simple which is outside the scope of the SAR. The Investment Adviser is actively involved in assessing the value of these assets, but in the meantime the loan has been marked at approximately 52p in the pound to reflect a valuation of Simple’s assets alone which we and our independent reviewer believe to be conservative and realistic. The effect of this has been to reduce Net Assets Value by 1.59 pence per share. The Investment Adviser, supported by the Board, continues to be very actively focused on this loan, as well as on the two other underperforming assets, which include a loan to Australian potassium project, and a property tenanted by a private school in Washington DC. We will continue to update investors when appropriate.”

SEQI : Sequoia takes Bulb hit

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