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Mon, Dec 28, 2020 – 9:30 AM M.
The manager of the First Real Estate Investment Trust (First Reit) announced a rights issue proposal to raise gross proceeds of around S $ 158.2 million, which he said was “critical” for Reit to honor its debt covenants and avoid an imminent default of 39.8 percent of the total debt due on March 1 of next year.
According to an exchange filing on Monday, the administrator proposes to issue about 791.1 million units, which represents about 98 percent of the total units issued as of December 23, 2020. The issuance of waivable rights will be carried out pro rata of 98 units of rights per 100 existing units, at an indicative issue price of 20 Singapore cents per unit of rights.
The issue price is about 50.6 percent off the closing price of 40.5 cents on December 24, and about 44.4 percent off the pro forma NAV per unit after the completion of the proposed rights issue. It is also approximately a 33.3 percent discount on the theoretical ex rights price of 30 cents per unit.
“The issue of proposed rights is critical to First Reit,” said the manager. He noted that First Reit is currently facing a “significant refinancing hurdle” with about 80.2%, or about S $ 395.7 million, of its debt maturing in the next 18 months, at 39.8%, or about S $ 196.6 million, expires on March 1 of next year.
The manager said that the S $ 158.2 million in gross income, along with up to S $ 260 million in new banking facilities, which was announced on December 24, will allow First Reit to refinance its current S $ 400 secured loan lines. million, including repayment in March. .
In support of the proposed entitlement issue, the manager and OUE Lippo Healthcare have provided irrevocable commitments to accept, underwrite and pay in full their respective total interim allowances of entitlement units.
In the event that the proposed rights issue is unsubscribed, OUE Limited has also provided an irrevocable commitment that it will endeavor to have its wholly owned subsidiary Clifford Development (CDPL) apply, underwrite and pay in full the excess rights units. to the extent that they remain unsubscribed after the satisfaction of all excess rights unit requests.
In the event that the proposed rights issue is subscribed, OUE will commit with the insurers to ensure that CDPL subscribes and fully pays the rights units to the extent that they are not satisfactorily subscribed by virtue of the proposed rights issue.
The manager said the feasibility of the proposed rights issue depends on its being able to provide certainty regarding the valuations and cash flows of First Reit assets through the proposed restructuring of the master leases for the leased hospitals. to Lippo Karawaci, announced last month. .
First Reit will convene an extraordinary general meeting on January 19 of next year in which the shareholders must approve the resolution regarding the restructuring of the master lease.
Unitholders will also need to vote on an ordinary resolution for the proposed waiver by unitholders other than CDPL and their concert parties of their rights to receive a blanket offer for their CDPL First Reit shares.
The manager said that the two resolutions are not conditional on each other. The trustee will not launch the proposed rights issue unless the resolution on restructuring the master lease is passed.
If the resolution on the exemption is not passed, the manager said he will not launch the proposed rights issue unless he can arrange for the rights issue to be signed.
The commitments of OUE, OUE Lippo Healthcare and the manager are also conditional on the approval of both resolutions.
“If the proposed rights issue is not pursued, First Reit will face a critical need to reevaluate other financing options to avoid incurring financial default,” said the manager.
Victor Tan, chief executive officer and managing director, said the recapitalization of First Reit through the rights issue and the proposed restructuring of the master lease “will allow First Reit to emerge from its current challenges and provide the foundation for First Reit is repositioned and focused on delivering long-term returns for future investors. “
Units of First Reit closed at 40.5 Singapore cents on Thursday, down 1.2% or 0.5%.
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