Author's Note
Reporting this piece of news a few days late as I would like to share some thoughts about this offer. There is not much information about the Series A CPPU in the latest report filed in SGX. But more information could be found in the following reports filed in SGX last year, when the CPPU was first offered to institutions:
- Proposed Transactions and Receipt of Approval in-Principle for the Listing of the Rights Units and Conversion Units in Frasers Commercial Trust (30 JUN 2009)
- Completion of Acquisition of Alexandra Technopark and Issue of 342.5 million Series A Convertible Perpetual Preferred Units and 2,251,989,879 New Units in Frasers Commercial Trust (26 AUG 2009)
The latest offering is for existing FCOT unit holders, who are entitled to purchase one Series A CPPU for every 20 existing Units at S$1 per CPPU unit. Unlike the DPU for FCOT units which may vary, the DPU for CPPU unit is at a fixed amount. Based on the rate of 5.5% over the offer price of S$1, CPPU unit holder should get a fixed amount of 5.5 cents per unit per year.
From the point of view of the Trust, this is like a fixed interest borrowing of S$116.7 million at 5.5% per annum. The estimated payment for the CPPU units in this offer will come up to about S$6.4 per annum. If we include the CPPU units previously offered to institutions, the total of 342,500,000 CPPU units will require FCOT to pay about S$18.8 million per annum. Thus this new offer will likely reduce the DPU of existing FCOT unit holders since part of the distributable income will be used to pay the CPPU unit holders, unless the S$116.7 million raised could be used to purchase assets that can generate more than 5.5% per annum, or used to repay debts that are at a interest rate of more than 5.5% per annum.
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