CMT, CCT – DBSV

CMT and CCT jointly extend early tender offer to buy back CMBS for Raffles City

CMT and CCT have jointly extended an early tender offer to the CMBS holders of Silver Oak SPV. The group had earlier partially funded the purchase of the Raffles City property through a revolving credit facility of S$164m and an issue of S$866m CMBS, through the Silver Oak SPV. CCT’s 60% share of the CMBS amounts to cS$520m and CMT’s 40% share is S$346m.

The notes are due to mature on 13 Sep 2011 and both CMT and CCT have extended an early offer to buyback the notes by 2 June 2011 at a purchase price of 100.25 percent of the principal amount together with accrued and unpaid interest. Notes tendered after the Early Offer Deadline but before the Expiration Deadline will be purchased at 99% of their principal amount together with any accrued and unpaid interest thereon. The tender offer will expire on 8 June 2011.

We believe refinancing this tranche of debt under the current low interest rate environment would be earnings accretive to both reits as the existing average debt cost is relatively high at 4.1-4.2%. Also, these loans are backed by an asset with strong operating performance, which saw NPI yield rising from 3.69% in 2006 to 5.46% in 2010, and low existing loan to value ratios.

Maintain BUY with TP S$2.06 for Capitamall Trust and S$1.59 for Capitacommercial Trust.