CitySpring – BT

CitySpring trust unveils $210m rights issue

CITYSPRING Infrastructure Trust is looking to raise $210.2 million through a renounceable rights issue to strengthen its balance sheet.

The trust, partly owned by Temasek Holdings, will issue about 539 million new units at a price of 39 cents per rights unit. The issue will be offered to unitholders on the basis of 11 rights units for every 20 units held, said its trustee-manager CitySpring Infrastructure Management yesterday.

Temasek, which owns 28 per cent of CitySpring, has irrevocably undertaken to subscribe for 85 per cent of all the rights units. The existing directors of the trustee-manager also intend to take up their entitlements under the rights issue in full, said CitySpring.

The rights issue is at a 27.1 per cent discount to CitySpring’s last transacted price of 53.5 cents per unit before a trading halt was imposed for the second half of the day yesterday.

Net proceeds from the issue, expected to be $204.8 million, will be used to reduce CitySpring’s net gearing, and give it the flexibility to pre-pay or refinance bonds that it previously issued to finance its acquisition of Australian undersea electricity transmission cable Basslink.

Funds could also be used for CitySpring’s general corporate purposes.

‘The rights issue will strengthen the group’s balance sheet and give it greater flexibility to reduce its gearing, whether at Bass-link or CitySpring level.

‘The trustee-manager is confident that following the rights issue, the negative outlook on the bonds’ rating can be removed, thereby ensuring that Basslink is not precluded from continuing to make distributions to CitySpring,’ it said.

Standard & Poor’s has a BBB- rating on the Basslink bonds and a negative outlook on them, citing Basslink’s vulnerability to refinance the bonds at a higher interest cost in 2015. When the bonds were issued, it was stated that if their rating falls to BB+/Ba1 or lower, Basslink will not have to make distributions to CitySpring.

Basslink generated cash earnings of A$10.8 million ($14.2 million) for the three months ended March 31, 2010, up 83.1 per cent from the same period a year ago. This helped to lift CitySpring’s cash earnings for the quarter, during which the trust upped its cash earnings by 7.4 per cent to $23.5 million for the fiscal fourth quarter.

Over the last three financial years, Basslink has distributed an average of A$4.7 million per quarter to CitySpring.