MPS – BT
MacarthurCook Fund H1 distribution falls
DPU for quarter ended Dec 31 was cut as warned by the fund
MACARTHURCOOK Property Securities Fund yesterday reported a distribution income of A$6.68 million (S$6.64 million) for the half year ended Dec 31, 2008 – 46 per cent less than a year ago.
And as the fund had warned last year, distribution per unit for the quarter ended Dec 31 was cut to one Australian cent, down from 2.625 Australian cents for the same period last year. This is part of measures to ‘strengthen the fund’s balance sheet’ amid challenging economic conditions.
‘Increasing numbers of listed and unlisted property trusts have been reducing distributions as sustainable operating cash flows come under pressure,’ the fund said. ‘This is predominantly from a decrease in asset values and/or adverse currency movements.’
The fund also announced a deeper net loss of A$30.35 million caused by unrealised investment losses as the value of listed and unlisted property securities fell. It had incurred a smaller net loss of A$3.25 million a year ago.
As at Dec 31, the fund’s assets were worth A$152 million and around 85 per cent were in unlisted property securities. Some 11 per cent were in listed property securities. Total asset value had plunged 41 per cent since end-2007. Not only does the fund have to contend with falling asset values and a shrinking distribution income, it also has to refinance a A$45.5 million debt facility by May 15 this year. It said that the lender, OCBC Bank, has indicated that it would not roll over this facility.
But the fund reassured investors that it is ‘in negotiations with several alternative financiers and has reason to believe that a new financing arrangement will be established prior to the termination date’.
‘Once the debt is refinanced, monies redeemed from unlisted (funds) may be further directed to real estate investment trusts due to better relative value,’ it said.
The fund’s loan-to-value ratio stood at 29.9 per cent as at Dec 31. There were no trades in the fund’s units yesterday. The counter last registered a closing price of 10 Singapore cents on Tuesday.
MIIF, MPS – BT
Three property, infrastructure funds allay fears
Two MacarthurCook funds and one Macquarie fund update financial positions
THREE property and infrastructure funds yesterday issued statements in a bid to allay market concerns about tighter credit, and to provide updates on their financial positions.
Facing a possible rating downgrade by Moody’s Investors Service, MacarthurCook Industrial Reit (MI-Reit) reassured investors that it is ‘advanced in negotiations’ to refinance a $220 million facility maturing in April 2009. Discussions should be finalised in January next year.
Moody’s said on Tuesday that MI-Reit, with a Baa3 corporate family rating, ‘faces significant refinancing risks’ as this amount of debt is not covered by available committed facilities.
Moody’s review also reflected concerns over MI-Reit’s asset and tenant concentration, which could be ‘much greater…than is consistent with a Baa3 rating.’
To this, MI-Reit said that its income is protected by a long lease expiry profile. For instance, only 3.6 per cent of the trust’s rental income will be subject to lease expiry in FY2010.
Head lease arrangements and a diversified portfolio of quality tenants also contribute to income security, it added. Around 36 per cent of rental income comes from manufacturing facilities which ‘tend to have higher tenant retention rates in an economic downturn’.
MI-Reit ended trading yesterday with an unchanged unit price of 33 cents.
Another fund, the MacarthurCook Property Securities Fund, also updated investors on its operations yesterday.
‘While interest rates around the world are now trending down, the ability to source competitively priced debt, combined with the anticipated slowing in economic growth, continues to be a concern for the market,’ said Richard Haddock, chairman of fund parent MacarthurCook Fund Management Ltd.
A priority is to further reduce debt and prudently manage its underlying portfolios, said the MacarthurCook Property Securities Fund. One strategy is to cut its weightings on unlisted property and use those funds to reduce debt.
A third fund, the Macquarie International Infrastructure Fund Limited (MIIF), said yesterday that it has no bilateral dealings with known troubled financial institutions.
According to the fund, borrowings held by its underlying businesses have remaining maturities of three to 14 years, and most of its interest exposures are also hedged for the medium to long term.
MIIF also said that its businesses are performing strongly in line with management’s expectations. It therefore expects income this year to be comparable with that received last year.
The unit price for MIIF rose 2.5 cents yesterday to close at 37.5 cents.
MPS – The Australian Business
MacarthurCook wants to activate its poison pill
PROPERTY funds manager MacarthurCook is holding a gun to the heads of its shareholders. It has been forced to admit that it could be in financial difficulties if they do not ratify the defensive poison pill share placement to IOOF Holdings, which the board made to head off a potential takeover bid from AMP Capital.
Moreover, its problems are self-inflicted. Its debt blowout is due to MacarthurCook acquiring units in two of the funds that it manages, MacarthurCook Industrial Property Fund (MIFS) and MacarthurCook Property Securities Fund (MPS).
The purchases were largely funded with short-term borrowings as MacarthurCook intended to sell the securities, but a plunging share market has left the company unable to sell at a price the board views as in the best interest of shareholders. In other words, the company would be forced to incur significant losses.
MacarthurCook admits that if shareholders do not ratify the placement it no longer has sufficient cash to repay IOOF. Presumably the funds have already been used to pay down debt.
Moreover, it concedes that it would be “extremely difficult” to raise additional debt on commercially acceptable terms, and is unlikely to be able to raise equity on as favourable terms as the placement. And if it were forced into asset sales they would probably be at well below fair value. If MacarthurCook were forced to repay IOOF it would have a significant adverse impact on the company’s financial position.
Macarthur says that on a worst case scenario it may be unable to raise the funding to repay IOOF, which would have an even bigger adverse impact: indeed, it would raise solvency questions.
Perhaps that is why MacarthurCook director Nick Basile urges shareholders to ratify the placement, but vote against other aspects of an alliance including the poison pill. Its terms are that for two years IOOF can only dispose of its shareholding if there is a takeover bid or scheme of arrangement that is recommended by the MacarthurCook board, or a third party acquires more than 50 per cent (which would be unlikely in the absence of a board recommendation).
Basile is also MD of Ascalon Partners (jointly owned by funds manager Sam Kaplan and St George Bank), which earlier had entered into a pre-bid agreement with AMP Capital to accept for its 18.37 per cent holding if AMP proceeded with a cash bid for MacarthurCook at $1.35 a share.
When AMP Capital’s interest in a bid was disclosed in June, MacarthurCook’s share price was 80c, so the proposal represented a whopping premium of 69 per cent.
MacarthurCook shares jumped to $1.25, and it promptly raised $3.9675 million by placing 3.45 million shares with IOOF at $1.15, giving IOOF a 13 per cent stake.
AMP Capital obtained a ruling from ASX that the placement breached the listing rules because it lacked shareholder approval. ASX left a remedy to MacarthurCook, so AMP Capital went to the Takeovers Panel which made a declaration of unacceptable conduct and ordered MacarthurCook to obtain shareholder approval by September 1 or cancel the placement and repay IOOF.
MacarthurCook portrays the placement as part of an alliance with IOOF to jointly develop and market retail direct property and mortgage products. MacarthurCook would become the preferred direct property and marketing manager of the IOOF group.
The MacarthurCook Mortgage Fund would carry the IOOF prefix and IOOF would take over marketing and distribution.
Basile’s recommendation to ratify the placement is subject to no superior equity funding proposal emerging, and he says any such proposal should be “seriously considered and pursued”.
In the absence of a superior equity funding alternative, Ascalon will vote in favour of the placement but oppose implementation of the strategic alliance and the poison pill (euphemistically described by MacarthurCook as the “IOOF undertaking”).
The five directors who back all the proposals say IOOF’s agreement not to sell its stake does not bar AMP Capital from making a bid because it involves only 13 per cent of the capital. They omit to say that the directors speak for 13 per cent, which would mean they would have their foot on more than 25 per cent. That could well be a disincentive to AMP Capital or any other potential bidder.
Other big holders include Acorn Capital (12pc) and Wilson HTM (9pc) and it would surprise if they reduced bid prospects by backing the poison pill.
The shareholder meeting is on August 27. If AMP Capital is still interested it could turn the heat up on the MacarthurCook board were it prepared to state that, provided it was allowed to undertake due diligence which proved satisfactory, it would be prepared to do the placement at $1.35 a share and to make a bid at that price, subject to a board recommendation (in the absence of a superior proposal).
It would be difficult for the board to reject such a proposal as it would give the company a further $690,000 for debt reduction. Admittedly, it would not have the claimed benefits of the strategic alliance with IOOF, but it is very likely shareholders will in any case vote down the alliance, because it would reduce the prospects of a bid.
MacarthurCook claims that since its 2007 annual report its strategy has been to broaden the distribution of its products and increase funds under management by leveraging off the capabilities of “a larger organisation”, and to reduce its debt.
The annual report did say MacarthurCook planned to transfer the responsible entity role of its Diversified Property Income Fund and its Mortgage fund (which is not proposed in the IOOF alliance). The first reference this commentator can find to the need to cut rising debt was in February, in its half-yearly result. That showed debt had ballooned from $3.2 million to $10.2million at a time when, according to MacarthurCook, it was seeking to reduce debt and gearing.
The debt included short-term advances of $6.36 million and core amortising debt of $2.98 million. The company spent $5 million in picking up part of the shortfall to a rights issue by the Property Securities Fund and $3.9 million in acquiring units in the Industrial Property Fund when it listed last year.
The half-yearly accounts showed MacarthurCook valued the investments in its listed offshoots at $16.46 million, based on a “fair value” of 88c for units in the Property Securities Fund, 90c and 94c for units in the Industrial Property Fund and 62c for units in the Singapore-based Industrial REIT. On present market prices they would have a value of only $9.5 million. MacarthurCook says its core debt facility is due for renewal on December 31 and requires the debt to be reduced to $2.5 million by June 30 and $2.25million by September. The overdraft has to be reduced to $2.5million by June 30 and $2million by September 30, while a $4.3 million short-term advance is due for renewal on July 17.
The company releases its annual results in mid-September and it would be helpful to MacarthurCook holders were the release to be brought forward to before the meeting, or were they at least to be given a forecast and an up to date picture of the outstanding debt to enable an informed vote.
The signs of stress have been apparent for those investors prepared to pore over the details — and some clearly did, as MacarthurCook’s share price has plunged from $4 since last August, and is now back to 80c, reflecting uncertainty as to whether AMP Capital will bid.
Source : The Australian Business
MacCookPSF – SGX
Distributions for 2008/2009
The anticipated distribution for next financial year is 1.75 Australian cents per unit paid quarterly.
The proposed reduction in distribution for next financial year is a result of –
• distributions being suspended or reduced on a number of the Fund’s investments;
• increased borrowing costs on the Fund’s new debt facility;
• the lack of placement fees received in the period; and
• the requirement to reduce the Fund’s debt facility from $63m to $50m over the period to March 2009.
Based on market prices as at 19 June 2008 the forecast distribution represents a yield of 13.46% p.a over the financial year.
Source : SGX
MacCookPSF – Reuters
Investors count Centro losses, rivals eye assets
MELBOURNE (Reuters) – Some of Australia’s top fund managers face big losses from the this week’s 80 percent slump in Centro Properties Group shares, as several of the mall operator’s rivals begin to scan its assets for possible purchases.
Centro (CNP.AX: Quote, Profile, Research), which owns 700 shopping malls in the United States, has lost some A$4.5 billion (1.9 billion pounds) in market value after it revealed that it and its affiliates were having trouble refinancing A$3.9 billion in debt due to the global credit crunch.
Documents filed with the Australian Securities and Investment Commission show that Barclays (BARC.L: Quote, Profile, Research) unit Barclays Global Investors Australia, Colonial First State, and UBS Asset Management (UBSN.VX: Quote, Profile, Research) all held stakes of over 5 percent in Centro.
“It was a concentrated register. When you see the end of month performance numbers, you’ll see it’s had an enormous negative impact on those who owned it. Bonuses will be on the line,” said BT Investment Management portfolio manager Jack Chemello.
“The demise of Centro is going to be a defining event in property investment in Australia, between those who got it right and those who got it wrong.”
Centro shares fell as much as 86 percent to an all-time low of $0.42 on Tuesday, before recovering to $0.80. They have since risen to A$1.32 at Thursday’s close after the company said it was still viable and did not have to sell assets. It has to renegotiate some debt facilities by a mid-February deadline.
Colonial, the wealth management arm of Commonwealth Bank of Australia Ltd (CBA.AX: Quote, Profile, Research), said it had a 12.18 percent stake in Centro as at December 12, across a large number of funds.
The stake was worth A$587 million on December 12. If unchanged, it would now be worth less than a quarter of that — about A$136 million — based on Centro’s last traded price.
A Colonial spokeswoman declined to comment on the specific value of the stake.
Barclays’ Australian arm raised its Centro stake on December 4 to 9.3 percent, worth some A$568 million then. The stake would have been worth A$103 million on Thursday. Barclays did not return calls seeking comment.
UBS Asset Management said its stake in Centro on December 13 was 5.09 percent, worth A$258 million. That compares with A$57 million as of Thursday. UBS confirmed the shareholding on Thursday, but declined to comment further.
Close to 90 percent of the shares on issue have been traded in the past four days.
Australia’s big banks have declined to comment on reports about their exposure to Centro. Local media has put Commonwealth’s exposure at A$1.2 billion, National Australia Bank Ltd’s (NAB.AX: Quote, Profile, Research) at A$1.1 billion and Australia and New Zealand Banking Group’s (ANZ.AX: Quote, Profile, Research) at A$1.2 billion.
Meanwhile, some of Centro’s rivals are preparing to make bids for some A$2.6 billion worth of the company’s retail assets, The Australian newspaper reported on Thursday, citing no sources.
The paper said Westfield Group (WDC.AX: Quote, Profile, Research), Commonwealth Bank-managed CFS Retail Property (CFX.AX: Quote, Profile, Research) and GPT Group (GPT.AX: Quote, Profile, Research) were among those vying for Centro’s Australian wholesale trust, which has assets of A$2.6 billion, including interests in shopping malls in Melbourne, Sydney and Perth.
“We look at any opportunity that meets our business model and strategy and that is across all opportunities in the market place,” a GPT spokeswoman said, declining to comment on Centro.
The other firms declined to comment.
“There is definitely significant demand for some of their assets, and there are clearly some good quality assets,” an industry source told Reuters.
“Good quality Australian assets are generally not available, so when they do become available they are in very high demand.”
Source : Reuters