CitySpring Infrastructure Trust (CitySpring) announced a one-for-one Rights Issue on 14 August. This Rights Issue is to raise a gross proceeds of approximately S$235.2 million at S$0.48 for each Rights Unit.
At S$0.48, the Rights Unit is priced at 38.5% discount from the pre-announcement price of CitySpring of S$0.78 on 13 August. It is at 23.8% discount from the theoretical ex-rights price of S$0.63 per unit. However, the current price of CitySpring had dropped to S$0.565 as at 4 September. The Rights Issue is now at lower discount of 15%.
The pro forma Net Asset per unit after accounting for the Rights Issue is S$0.45 based on the unaudited financial statements as at 30 June 2009 (1Q2010 results). To pay S$0.48 for the Rights Issue, you are paying 1.06 times Price-to-Book (PB) value. The pro forma yield based on annualised 1Q2010 distribution per unit (DPU) divided by Rights Issue price of S$0.48 is 8.3%. This yield is higher when compared with most REITS listed on Singapore Exchange (SGX).
The rationale for the Rights Issue is to strengthen CitySpring’s Balance Sheet and enhance its financial flexibility to position for potential investment opportunities for organic and inorganic growth. The net proceeds is applied to re-pay part of the Term Loan Facility from DBS Bank (S$370 million). In place of the Term Loan Facility, CitySpring will replace it with a new Revolving Credit Facility from the same bank of the same amount. By doing so, it will save CitySpring net savings of S$4.7 million per annum.
This Rights Issue is structured to help CitySpring to reduce capital funding costs and ultimately benefits the unitholders in the longer run. Even at 15% discount based on the last traded price of CitySpring, it is well worth it to subscribe to the Rights Issue.
Written on 9/6/2009 11:49 AM
Copyright © 2009, the author known as LKT in Singapore.
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