FCOT – BT
FCOT secures $675m loans; plans rights
Reit to raise $214m from 3-for-1 rights and pay sponsor $342m for property
FRASERS Commercial Trust (FCOT) will raise $213.9 million in a 3-for-1 rights issue and also acquire a property from its sponsor for $342.5 million as it looks to recapitalise.
FCOT also announced yesterday that it has secured financing for $675 million from a consortium of lenders. The offers of finance are conditional upon the recapitalisation exercise, which now has to be approved by shareholders.
FCOT, which has a $1.5 billion property portfolio spanning Singapore, Australia and Japan, plans to buy Alexandra Technopark from sponsor Frasers Centrepoint Limited (FCL).
It will pay for the purchase by issuing convertible perpetual preferred units (CPPUs) – a financial instrument that is rare in the Singapore market.
Then, the fresh loans from the lenders and the bulk of the proceeds from the rights issue will be used to refinance a significant portion of FCOT’s existing debt – including all debt maturing in 2009.
As at March 31, FCOT had gross borrowings of $945.5 million, of which $624.5 million is maturing in the second half of this year.
The entire exercise will see FCOT’s gearing fall from 58.3 per cent at end-Q1 2009 to 38.5 per cent.
And upon completion of the rights issue, the acquisition and issue of the CPPUs and the refinancing, FCOT will not have any debt due until 2012.
‘The transactions are critical for FCOT and will restore it to a stable platform,’ said Low Chee Wah, chief executive of the trust’s manager.
‘The completion of the recapitalisation of FCOT will address the refinancing concerns that have been raised by investors and analysts,’ added Chua Yong Hai, chairman of the trust’s manager.
‘We hope that the market will now re-rate FCOT’s unit price to a level that can reflect more closely its underlying intrinsic value.’
The rights issue was largely expected by analysts. The trust’s gearing rose to 58 per cent at end-Q1 2009 as its property portfolio booked a net revaluation deficit.
The write-downs FCOT has made to date may still not be enough, warned Nomura analyst Tony Darwell in a June 12 note.
‘On our numbers, we expect FCOT to book a further revaluation deficit of $247 million, pushing gearing to 0.73 times,’ he said.
And while FCOT was looking to divest assets, the Reit might need to do more and a rights issue or asset injection from the parent was likely, Mr Darwell added.
As predicted, FCL has indeed stepped in to help its Reit.
The developer, which is the property arm of conglomerate Fraser and Neave, will accept payment for Alexandra Technopark through the CPPUs.
It will also undertake the master lease for the property for five years and give FCOT an annual rent guarantee of $22 million.
In return, FCL will own the CPPUs, which will entitle it to a distribution of 5.5 per cent a year from the Reit.
FCL, which has a deemed stake of 22.2 per cent in FCOT now, will also take up its entire pro rata entitlement of the rights units and is willing to subscribe for up to 32.7 per cent of the total number of rights units.
FCL bought 17.7 per cent of Allco Commercial Reit and 100 per cent of the Reit’s manager for $180 million in July 2008.
The plan was to rename the Reit Frasers Commercial Trust, and inject Alexandra Technopark and two other properties into the portfolio.
The rights units are priced at 9.5 cents each, which represents a discount of 60.4 per cent to the stock’s closing price on Monday.
FCOT was suspended from trading yesterday.
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.
CCT – CNA
CCT says S$828m rights issue 1.35 times oversubscribed
CapitaCommercial Trust (CCT) said its rights issue was 1.35 times oversubscribed.
The trust had launched a 1-for-1 renounceable rights issue of 1.4 billion rights units at 59 cents each.
But applications came in for over 1.9 billion rights units.
CCT launched the rights issue to raise S$828.3 million, mainly to reduce its existing borrowings.
The rest of the proceeds will be used for capital expenditure, asset enhancements and general corporate and working capital purposes.
CCT said it expects the rights units to be listed and quoted on the Singapore Exchange mainboard from this Friday.
FCOT – SGX
Frasers Commercial Trust announces recapitalisation measures to strengthen its balance sheet and complete its refinancing
- Rights Issue to raise S$213.9 million for debt repayment, capital expenditure and working capital
- Acquisition of Alexandra Technopark, a quality Singapore business space asset financed by preferred equity
- Debt facilities of S$675.0 million secured to refinance debt maturing in 2009
StarHill – BT
Starhill falls after unveiling rights issue plan
Moody’s affirms its ratings of the Reit, says the outlook for the ratings is stable
STARHILL Global Reit yesterday fell 3.9 per cent – amid a broad market pullback – a day after the property trust said it will tap the market through a $337.3 million rights issue.
Meanwhile, Moody’s Investor Services affirmed its ‘Baa2’ corporate family and ‘Baa3’ unsecured debt ratings of Starhill Global Reit – which owns stakes in Wisma Atria and Ngee Ann City in Singapore.
Moody’s added that the outlook for the ratings is stable.
The Reit, which is partly owned by Malaysia’s YTL Corp, lost 2.5 cents to close at 61.5 cents. The trust on Monday announced plans to sell new units to raise $337.3 million to reduce debt and get new funds for possible acquisitions.
The Reit does not have any refinancing requirements in 2009, although the bulk of its $670.1 million of borrowings are due in 2010.
The rights issue will improve Starhill Global Reit’s balance sheet, said Franklin Heng, chief executive of the trust’s manager. On Monday, the trust also announced a 7.1 per cent write-down in the value of its property portfolio to $1.95 billion as at June 15, 2009 from $2.1 billion at end-2008.
That would have pushed up its gearing from 31.1 per cent to 33.4 per cent. But with the rights issue and the repayment of some debt, gearing will instead be reduced to 20.7 per cent.
The capital raising should provide the Reit with adequate buffer against further asset write-downs, Moody’s said.
‘If (the rights issue is) completed and used to reduce debts by 35 per cent to $434.3 million, the capital raising would materially enhance Starhill’s credit metrics,’ said Moody’s senior analyst Kathleen Lee.
However, while the initiative will have a positive effect on Starhill’s credit metrics once completed, Moody’s is concerned that further weakening in the operating environment could translate into slower demand for rental space and result in further asset write-downs. This could be exacerbated by the strong supply of new retail space coming on-stream within the Orchard Road precinct between Q3 2009 and 2012, Ms Lee added.