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Big recapitalisation exercise at MI-Reit

Source: ARENA
Edited By: John

MACARTHURCOOK Industrial Reit (MI-Reit) has announced a slew of measures to recapitalise and refinance its debts and contractual obligations.

It has proposed to raise gross proceeds of $217.1 million through the issue of new units to AMP Capital Holdings and ‘cornerstone investors’ and followed by a rights issue. In addition, it has secured credit agreements for a term loan of $175 million and a bridge loan of $39.9 million.

With these transactions, the Reit’s short-term borrowings of $226 million due to mature by the end of this year will be fully refinanced.

Under the unit placement, AMP Capital is buying a 16.1 per cent stake in MI-Reit for $22 million. MI-Reit will issue 78.6 million new units to AMP Capital at $0.28 each. The issue price is at a 31.7 per cent discount to the closing price of $0.41 on Thursday.

This will usher in the Australian investment manager as a co-sponsor of MI-Reit to join hands with existing sponsor AIMS Financial Group.

MI-Reit is also issuing 142.9 million new and fully underwritten units to certain ‘cornerstone investors’, including 9.8 million units to its principal sponsor AIMS Financial Group at $0.28 apiece. The gross proceeds of $40 million will be partially used to meet a contractual obligation to pay $90 million for a private lot at 1A International Business Park.

Following these placements, MI-Reit will undertake a two-for-one rights issue, which is also fully underwritten. It will issue 975.6 million new units at $0.159 apiece to raise $155.1 million. The proceeds will be used to pay down debts and acquire properties from AMP Capital.

MI-Reit has agreed to acquire four industrial properties in Singapore from AMP Capital for $68.6 million to diversify its sources of income. These properties have initial yields of between 8.2 and 9.6 per cent.

‘The transactions are critical for MI-Reit and will restore MI-Reit to a stable platform,’ said Nicholas McGrath, CEO of the Reit manager. ‘The key benefits will outweigh the dilutive effects of the transactions on MI-Reit’s distribution per unit and net asset value per unit, and are in the best interests of unitholders.’

Speaking at a briefing yesterday, Mr McGrath said that he expects the rights issue to enjoy a good take-up as it is attractively priced.

MI-Reit will seek shareholders’ approval for these transactions at an extraordinary general meeting on Nov 23. MI-Reit will be rebranded as AIMS AMP Capital Industrial Reit.

Mr McGrath termed the transactions ‘transformational’ for MI-Reit. The Reit will enjoy support from the new sponsor AMP Capital, whose expertise in asset management and exposure in Asia Pacific complements AIMS’s direct fund management experience and presence in Australia and China.

MI-Reit will also have the first right of refusal to acquire AMP Capital’s logistics complex at 27 Penjuru Lane in Singapore, Mr McGrath said. There are opportunities over the next eight to 12 months for asset acquisitions given the properties identified under AMP Capital and other parties, Mr McGrath added.

To show its commitment, AMP will acquire 50 per cent of the Reit’s manager from AIMS and has committed to sub-underwrite a portion of the rights issue, bringing its total investment in MI-Reit to $54.1 million. This marks its first investment in an Asian Reit.

MI-Reit has separately signed a three-year term loan of $175 million with three banks – Standard Chartered Bank, Commonwealth Bank of Australia and National Australia Bank – and a bridge loan of $39.9 million with Standard Chartered Bank. These credit facilities will be used to partially refinance a Singapore dollar term loan.

The transactions are expected to pare down the Reit’s leverage from 44.7 per cent as at Sept 30 to 29 per cent on a proforma basis, Mr McGrath said.