REIT Financial News - 22 JUN 2010: CDL HOSPITALITY TRUSTS ANNOUNCES PRIVATE PLACEMENT OF S$150 MILLION

CDL HOSPITALITY TRUSTS ANNOUNCES PRIVATE PLACEMENT OF S$150 MILLION. See:

• Press Release
• Announcement
• Notice of Book Closure for advance distribution
  

Key Points

• Private placement of new stapled securities in CDLHT at an issue price of between S$1.71 and S$1.77 per new stapled security to raise a minimum gross proceeds of S$150.0 million.
• the Manager intends to use approximately S$116.3 million of the net proceeds from the private placement to repay the Singapore dollar portion of the one-year bridging facility that was used to finance the recent acquisition of Australian properties comprising Novotel Brisbane, Mercure Brisbane, Ibis Brisbane, Mercure Perth and Ibis Perth in 1Q 2010.
• The balance of the proceeds will be used to reduce debt levels arising from the partial utilisation of a S$80.0 million committed revolving credit facility from DBS Bank Limited, payment of transaction expenses in connection with the private placement of new stapled securities and general corporate or working capital purposes.
• the gearing level is expected to be reduced from 30.9% to 22.6% following the private placement.
• There will be an advanced distribution  which is approximately 4.8 cents per unit. The actual quantum of the DPU will be announced on a later date after the management accounts of H-REIT for the relevant period have been finalised.
• Based on the minimum amount of New Stapled Securities to be issued pursuant to the Private Placement, the number of units in CDL H-Trust in issue will increase by 84,750,000, which is an increase of 10.1% of the total number of units in issue as at 22 June 2010.
  

Author's Note
There will be an advance distribution for existing share holders of approximately 4.8 cents per unit. The actual amount will be announced on a later date after the management accounts of the relevant period have been finalised. The book closure date for the advance distribution is on 30 Jun 2010, and the payment of the advance distribution is on 27 Aug 2010.

A very quick and rough estimate of the impact of the private placement on the impact:
Using the Q1 2010 DPU of 2.32 cents, we annualize it:
Annualized DPU = 2.32 x 4 = 9.28 cents
Assuming no. of units increased by 10.1%, the Annualized DPU = 9.28/1.101 = 8.43 cents
The share price before trading halt on 22 JUN = 1.89
Yield based on share price before trading halt on 22 JUN = 8.43/189 x 100 = 4.46%.

Of course this is a very rough calculation to estimate the impact without taking in factors such as reduction of interest payment after paying off the debts. Also need to take note of the relatively low gearing of 22.6% if debts have been paid off. This will mean more debt headroom for further yield accretive acquisitions.