KREIT – BT

K-Reit’s free-float falls below 25% after rights issue

But number of free-float units more than doubles

K-REIT Asia’s free float of units will fall to 24.9 per cent from 27.1 per cent following the subscription by the Keppel Group for rights units not taken up by minority shareholders.

The trust’s rights issue of 396.9 million units priced at $1.39 per unit – which was 96.3 per cent subscribed, inclusive of excess rights applications – became fully subscribed after Keppel Corp and Keppel Land mopped up 14.9 million rights units, or 3.7 per cent of the issue, not taken up by minority shareholders.

While the free-float percentage will decline following the rights issue, the absolute number of free-float units will more than double from 67.7 million units to 161.2 million units.

Of the 14.9 million units, Keppel Corp took up 6.3 million units and Keppel Land 8.6 million units in line with their undertakings.

The rights issue will leave Keppel Land with 43.6 per cent of K-Reit’s enlarged equity base of 647.2 million units, and Keppel Corp will control 31.5 per cent. Prior to the rights issue, Keppel Land held 42.6 per cent of K-Reit’s total 250.2 million units, while Keppel Corp had 30.3 per cent.

K-Reit’s rights issue, which closed on April 25, will raise gross proceeds of about $551.7 million that will partly refinance the $942 million bridging loan K-Reit has taken from Keppel Corp to finance the trust’s acquisition of a one-third interest in One Raffles Quay. K-Reit bought the stake in One Raffles Quay from Keppel Land last year.

The $941.5 million acquisition price for the new Grade A office development works out to $2,109 per square foot (psf) of net lettable area. Stripping out income support of up to $103.4 million provided by seller Keppel Land through 2011 to K-Reit Asia reflects a lower net purchase price of $1,877 psf.

In a release yesterday, K-Reit said that based on gross proceeds of about $551.7 million from the rights issue, the trust’s aggregate leverage will be reduced from 53.9 per cent to 27.7 per cent and create for K-Reit about $679.8 million funding capacity based on 60 per cent leverage limit.

In late March, the trust manager’s CEO, Tan Swee Yiow, said in an interview with BT that management will look at a variety of options, including convertible bonds, commercial mortgage-backed securities and straight debt, to raise balance funds needed to repay the bridging loan.

K-Reit said yesterday the rights units will be listed on the Singapore Exchange from 9am on May 8. On the stock market yesterday, K-Reit ended six cents lower at $1.44.