Tag Archives: Funds

INDIABULLS Properties Investment Trust (IPIT) has
proposed to issue some 1.25 billion new units at 16 cents each to raise $200.1 million.

The business trust also intends to look beyond office space to invest in retail, residential or hospitality assets. IPIT is conducting the 53-for-100 renounceable and underwritten rights issue to reduce debt as the Mumbai office space market weakens – occupancies and rents have both declined,
it said yesterday.

The trust had borrowings of $258.3 million as at June 30, against cash and cash equivalents of $6.7 million. The ratio of borrowings to total assets was 10.4 per cent. Lower debt obligations would put it in a ‘better position to make commercial decisions’ and in a ’stronger negotiating position with potential tenants’, it said.

The rights issue price of 16 cents is at a 48.4 per cent discount to IPIT’s closing price of 31 cents on Wednesday. The trust asked to halt trading in its units  yesterday because of the cash call. Of the $200.1 million to be raised,
around $193 million, or 96.5 per cent, will go towards debt repayment. The
remaining $7.1 million will pay for expenses incurred for the rights issue, and for corporate and working capital purposes. Continue reading →

BANKS may have loosened their purse strings but many real estate investment trusts (Reits) here are sticking to rights issues or private placements for funds – despite their dilutive effects. Since June, another five Reits have conducted such exercises to raise more than $1.23 billion. Investors were not too pleased in some cases and sold out, driving unit prices down. Why would some Reits rather incur the wrath of unitholders than turn to banks?

For Reits looking to trim gearing, there are few other fund raising options. While credit conditions have certainly improved, ‘leverage’ remains a dirty word and many would prefer to repay debt than to refinance or borrow more. Frasers Commercial Trust was one which made a cash call in June for this. ‘Peer pressure’ keeps Reits particularly disciplined. With many paring down debt in the last few months, those with relatively higher leverage ratios would start drawing the wrong kind of attention from watchful analysts and investors. Just two out of 13 Reits have gearing levels exceeding 40 per cent, a CIMB report this week shows. While refinancing may have become easier, there is no saying if credit might tighten again.

Banks are still exposed to the recession – the default rate on commercial mortgages held by US banks, for instance, more than doubled in the second quarter from a Continue reading →