CCT – BT
CCT raising $828.3m via 1-for-1 rights issue
Exercise will reduce gearing to 30.7% despite fall in value of portfolio in latest revaluation
CAPITACOMMERCIAL Trust (CCT) plans to raise $828.3 million in a rights issue as it seeks to reduce its gearing, it said yesterday.
The move comes as the office real estate investment trust (Reit) saw the value of its portfolio fall 10.15 per cent in the latest valuation exercise. CCT said that the value of its Singapore properties fell from $6.71 billion in December 2008 to $6.03 billion yesterday.
The fall in CCT’s portfolio value – which came about as the valuers factored in falling market rents – would have pushed the Reit’s gearing from 38.3 per cent to 43.1 per cent. But with the rights issue, the gearing will instead fall to 30.7 per cent. The Monetary Authority of Singapore has set a 60 per cent threshold for a Reit’s gearing.
‘It (the rights issue) will reduce CCT’s gearing to the low end of our target gearing range of 30 per cent to 45 per cent through property market cycles,’ said Lynette Leong, chief executive of the Reit’s manager. The cash proceeds from the rights issue will also enhance CCT’s financial flexibility by boosting its balance sheet and improving its credit profile, she said.
Daiwa Institute of Research analyst David Lum told Bloomberg: ‘It seems CapitaCommercial is building up capacity to refinance debt, and creating a buffer against potential asset writedowns.’
CCT said in April that it has no more refinancing requirements for this year.
Ms Leong said yesterday: ‘We have achieved our refinancing objectives for 2009 by securing refinancing for borrowings in advance of debt maturity dates.’
The rights issue is being done from a ‘position of strength’, she added.
The proceeds will be used to repay future debt, and priority will be placed on debt due next year, Ms Leong said yesterday. CCT has some $885 million of debt due in 2010.
To raise the cash, CCT will sell 1.4 billion shares at 59 cents each in a one-for-one rights issue. The offer price represents a 44 per cent discount to the the stock’s last traded price of $1.06. The offer price is also a discount of 61 per cent to CCT’s net asset value per unit of $1.51 after taking into account the revaluation of CCT’s properties and completion of the rights issue.
CapitaLand, which has a 31.4 per cent stake in CCT, will take up its full entitlement of rights issue worth some $260 million in all.
The trust also revealed yesterday that the value of its property portfolio fell from December 2008 to May this year as market rents declined. The three most valuable wholly-owned properties in CCT’s portfolio – Capital Tower, Six Battery Road and One George Street – saw their values fall by 9.4 per cent, 13.8 per cent and 11.9 per cent respectively. Raffles City, which CCT co-owns with another CapitaLand unit CapitaMall Trust (CMT), also saw its value fall by 5.3 per cent.
Analysts have said that office rents could fall by up to 70 per cent from their peaks in 2008 to their trough sometime in 2011 or 2012. Office rents fell 11 per cent in in the first quarter of 2009, according to data from the Urban Redevelopment Authority.
CCT is the latest Singaporean listed company to raise funds via a rights issue, joining companies such as DBS Group Holding and Keppel Land in turning to investors for cash.
CCT’s parent company CapitaLand earlier this year raised $1.84 billion in a rights offer while CMT raised another $1.23 billion. Market rumours of a rights issue have dogged CCT since.
CapitaLand shares gained 1.2 per cent to $3.43 yesterday as trading resumed following the announcement. Trading of CCT shares remained suspended.
CapitaLand has risen 34 per cent and CCT has gained 18 per cent this year.