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.