Month: June 2009
FCOT – CNA
Fraser Commercial Trust to raise S$213.9m through rights issue
Frasers Commercial Trust (FCT) plans to raise S$213.9 million through a rights issue and is planning to acquire Alexandra Technopark from its sponsor Frasers Centrepoint to shore up its balance sheet.
The real estate investment trust will fund the S$342.5 million acquisition by issuing convertible perpetual preferred units (CPPUs), a form of preferred equity, to Frasers Centrepoint.
These CPPUs, which have an annual distribution rate of 5.5 per cent, will not be dilutive to existing units at least for the short term, as they can only be redeemed after three years.
This is believed to be the first time a Singapore REIT is using this instrument. This could be more palatable to the market, which analysts said is showing signs that it is tired of the round of dilutive rights issues in the recent months.
FCT is the sixth property trust this year to raise funds by issuing new units. In all, the six REITs hope to raise about S$3 billion.
“We can do a pure rights (issue), but that would be very dilutive,” said Mr Low Chee Wah, chief executive of the manager of Frasers Commercial Trust. “Together with our advisers, we came out with this instrument which at least addresses the issues that the REIT is facing in the short term.”
REITs have faced difficulties in securing refinancing as the value of their property portfolio fell amidst the recession.
The trust is refinancing its existing debt via a 3-for-1 rights issue at 9.5 cents per rights unit – a discount of 60.4 per cent to its closing price of 24 cents on Monday. The counter was suspended from trading on Tuesday.
As at March 31, 2009, the trust had gross borrowings of S$945.5 million, of which S$624.5 million is due in the second half of this year.
The trust has also secured new debt facilities of S$675 million, which, along with proceeds from the rights issue, will be used to refinance existing debt, including all debt maturing in 2009.
With this, FCT said its gearing will be reduced to 38.5 per cent from 58.3 per cent.
CCT – CNA
CCT says S$828m rights issue 1.35 times oversubscribed
CapitaCommercial Trust (CCT) said its rights issue was 1.35 times oversubscribed.
The trust had launched a 1-for-1 renounceable rights issue of 1.4 billion rights units at 59 cents each.
But applications came in for over 1.9 billion rights units.
CCT launched the rights issue to raise S$828.3 million, mainly to reduce its existing borrowings.
The rest of the proceeds will be used for capital expenditure, asset enhancements and general corporate and working capital purposes.
CCT said it expects the rights units to be listed and quoted on the Singapore Exchange mainboard from this Friday.
FCOT – SGX
Frasers Commercial Trust announces recapitalisation measures to strengthen its balance sheet and complete its refinancing
- Rights Issue to raise S$213.9 million for debt repayment, capital expenditure and working capital
- Acquisition of Alexandra Technopark, a quality Singapore business space asset financed by preferred equity
- Debt facilities of S$675.0 million secured to refinance debt maturing in 2009
StarHill – BT
Starhill falls after unveiling rights issue plan
Moody’s affirms its ratings of the Reit, says the outlook for the ratings is stable
STARHILL Global Reit yesterday fell 3.9 per cent – amid a broad market pullback – a day after the property trust said it will tap the market through a $337.3 million rights issue.
Meanwhile, Moody’s Investor Services affirmed its ‘Baa2’ corporate family and ‘Baa3’ unsecured debt ratings of Starhill Global Reit – which owns stakes in Wisma Atria and Ngee Ann City in Singapore.
Moody’s added that the outlook for the ratings is stable.
The Reit, which is partly owned by Malaysia’s YTL Corp, lost 2.5 cents to close at 61.5 cents. The trust on Monday announced plans to sell new units to raise $337.3 million to reduce debt and get new funds for possible acquisitions.
The Reit does not have any refinancing requirements in 2009, although the bulk of its $670.1 million of borrowings are due in 2010.
The rights issue will improve Starhill Global Reit’s balance sheet, said Franklin Heng, chief executive of the trust’s manager. On Monday, the trust also announced a 7.1 per cent write-down in the value of its property portfolio to $1.95 billion as at June 15, 2009 from $2.1 billion at end-2008.
That would have pushed up its gearing from 31.1 per cent to 33.4 per cent. But with the rights issue and the repayment of some debt, gearing will instead be reduced to 20.7 per cent.
The capital raising should provide the Reit with adequate buffer against further asset write-downs, Moody’s said.
‘If (the rights issue is) completed and used to reduce debts by 35 per cent to $434.3 million, the capital raising would materially enhance Starhill’s credit metrics,’ said Moody’s senior analyst Kathleen Lee.
However, while the initiative will have a positive effect on Starhill’s credit metrics once completed, Moody’s is concerned that further weakening in the operating environment could translate into slower demand for rental space and result in further asset write-downs. This could be exacerbated by the strong supply of new retail space coming on-stream within the Orchard Road precinct between Q3 2009 and 2012, Ms Lee added.
CMT – OCBC
Positive retail sales data eases concerns
Retail sales of small-ticket items picking up. While sales of big-ticket items such as motor vehicle remained weak, sales of small-ticket items have been picking up since March. According to the latest data from Singstat, the seasonally-adjusted retail sales excluding motor vehicles rose by 1.1% MoM in April. This was the second consecutive month of rising retail sales, following the 3.3% MoM increase in March.
More positive data from GSS. According to data from MasterCard, spending by local MasterCard holders during the first weekend (May 29 to 31) of the Great Singapore Sale (GSS) had increased by 7% YoY to US$26.3m. Including spending by tourists, sales increased by a smaller 1% YoY to US$37.5m and this was due to lower tourist arrivals. Nevertheless, spending by locals still represents a higher proportion of the retail spending and the improvement in spending sends a positive signal that consumer sentiment continues to improve after hitting a low in February.
Easing pressure on retailers and landlords. Even though the economic outlook remains uncertain, we believe that the initial stage of fear among consumers has now passed and small-ticket item spending by local consumers is now picking up, as seen in the recent retail sales data. This momentum has continued into May as supported by data from MasterCard. This bodes well for retailers that had been facing pressures from declining sales and rising operating costs since 2H08. To retail landlords such as CapitaMall Trust (CMT), concerns on tenant eviction and rising tenant turnover would also ease.
No catalyst in sight yet; maintain HOLD. While we believe that the worst could be over for the retail industry, we expect the recovery in consumer spending to be gradual as consumers are likely to stay cautious in light of the uncertain economic outlook. As such, we maintain our forecast of a 10% decline in rent for FY09 and a 5% decline in rent for FY10. Our RNAV estimate remains at S$1.36 per unit. We also expect mid-year revaluation of the retail malls to remain stable. After the Rights issue, its gearing level will decline to 29.1% after the repayment of borrowings and we estimate that CMT’s asset portfolio can tolerate up to an 18% decline in valuation before it reaches the upper bound of its comfortable leverage target of 30%-35%. Our fair value of CMT remains at S$1.21 and we maintain our HOLD rating.