SQN Asset Finance Income Fund Ltd Investment Update (4406V)
23 July 2018 - 7:25PM
UK Regulatory
TIDMSQN
RNS Number : 4406V
SQN Asset Finance Income Fund Ltd
23 July 2018
23 July 2018
SQN Asset Finance Income Fund Ltd
Investment Update Following the 30 June Financial Year-end
SQN Asset Finance Income Fund Limited (the "Company"), the
leading diversified equipment leasing fund listed in the UK, is
pleased to provide this update following the conclusion of the
financial year-end 30 June 2018 and in advance of releasing the
Annual Report and Accounts in October 2018.
Responding to requests for a higher level of disclosure for an
asset class still relatively new to the London-listed market, the
Company and the Manager have endeavoured to increase the frequency
and level of detail of market communications. In continuation of
this effort, the Company provides this update.
In the half-year report for 31 December 2017 released in March
2018, the Company identified six investments that were "Past Due
not Impaired". In conjunction with the release of the half-year
report, the Manager communicated to the market that, in the normal
course of generating yields at the levels necessary to sustain a
7.25% dividend, there would always be transactions requiring
attention. Further, it was reported that, based on the
collateralised nature of the Company's investment strategy,
workouts do not necessarily result in impairments and, on occasion,
have the potential for additional returns to be realised.
The Company is pleased to report that four out of the six
accounts have been restructured into an improved position and
confidence remains high on a positive outcome for the remaining two
investments which includes the Suniva investment and the relatively
small investment in the portfolio of telecommunication towers.
The Company is further pleased to report that no new material
issues have arisen in the portfolio. While the outlook remains
positive, it is expected that new issues will inevitably present
themselves at which time, the Company hopes that the market will
see these as being in the normal course and recognise that, given
time, they will likely be resolved.
The Company is also pleased to announce that more than 77% of
the C Share capital has been deployed and expects to increase the
dividend to an annualised rate of 7.25 in August 2018.
Individual Transaction Updates (In order as disclosed in the
half-year report and referenced above):
Solar (Suniva)
The Company has continued discussions with multiple
counterparties seeking to lease or purchase the Suniva equipment.
The recent developments in the United States have provided
additional support for domestic manufacturers which should
strengthen Suniva's market position. Furthermore, efforts have
intensified in pursuing the guarantee with subpoenas being issued
to officers of the guarantor. The Board, as advised by the Manager,
continues to believe that a full recovery of the Suniva investment
will be achieved. This is expected to be through the lease or sale
of the Suniva equipment and, to the extent required, by pursuing
the guarantee. The Company has examined the minimum expected
recovery under the lease or sale of the Suniva equipment and,
considering the potential time required to realise the guarantee,
the Company has reflected an impairment of GBP2.4m to the Suniva
investment to account for the risk adjusted time value of money on
such proportion of the investment should a full recovery not be
achieved through a sale or re-lease.
Medical Equipment
At 31 December 2017, it was reported that a hospital for which
the Company provided financing had filed for reorganization under
Chapter 11 of the US Bankruptcy Code. The hospital emerged from
bankruptcy in July having been purchased by a financial investor
with the ultimate intention of reselling the hospital at a multiple
of its acquisition price. Simultaneously with this transaction, the
Company has entered into a new secured $5m note, with enhanced
collateral, with the hospital and has also been granted a 15%
equity interest in the hospital. The interest rate on the note is
5%.
Transportation
The Company had previously reported that it provided financing
for four multi-purpose vessels at a relatively low loan to value.
The Company made the decision to force a sale of those vessels
which resulted in a series of competitive bids and a price
sufficient to pay the Company all outstanding principal and
interest. The Company is in the documentation phase of closing.
IT & Telecom
The Company provided financing for a portfolio of
telecommunication towers. The CEO of the borrower unexpectedly
passed away which resulted in a delay in selling or refinancing the
assets which caused the loan to go into default. The new management
of the operator is in the process of arranging to refinance the
Company's assets and has received terms sheets from four lenders. A
resolution to this matter is expected by September 2018. Until
then, the investment remains insured by an investment grade
reinsurance syndicate.
Hospitality (Snoozebox)
The Company has provided previous updates on the Snoozebox
restructuring. Since the date of the last update, the investment
has continued to generate regular income and is a now fully
performing under the terms of the new lease.
Agriculture (Anaerobic Digestion Plant)
At 31 December 2017, it was reported that an anaerobic digestion
plant representing approximately 7.5% of NAV and subject to a
finance lease was past due. The lease is now current and the plant
is operating in accordance with the planned ramp-up.
Enquiries:
SQN Capital Management, LLC
01932 575 888
Neil Roberts
Jeremiah Silkowski
Winterflood Securities Limited
020 3100 0000
Neil Langford
Chris Mills
Buchanan
020 7466 5000
Charles Ryland
Henry Wilson
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END
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