AMP NZ Office to raise $201million via rights issue, seeks debt repayment

Thursday 7th May 2009

AMP NZ Office Trust plans to raise $201 million through a rights issue and is in talks to repay a $242.5 million bank facility to reduce gearing and strengthen its balance sheet.

Gearing will reduce to about 19.3%, based on the property investor’s financial statements for the nine months ended March 31. It will offer nine new units for each 20 held, at 65 cents apiece, amounting to a 21% discount to its average trading price in the five days up to the announcement of the issue, it said in a statement.

The issue is being underwritten by First NZ Capital and major shareholder Haumi Company, with 19.9%, will take up its entitlement, the trust said. As part of its debt renewal, the trust plans to establish a new $100 million three-year facility starting in June.

The refinancing “will create a capital structure that provides a buffer for the current economic and market conditions, chief executive Rob Lang said. A surge in capitalisation rates and tightening of credit markets in the past three months contributed to the decision to strengthen the trust’s balance sheet, he said.

The trust will recognize a $27.6 million mark-to-market liability after cuts to the official cash rate reduced the value of its interest rate swap portfolio. With the refinancing and repayment of debt, it will have surplus fixed debt swaps and plans to cancel swaps valued at $80 million, incurring a swap cancellation fee of $13 million.

AMP NZ Office also announced it will reduce its distribution policy to reflect market uncertainty about future rental growth and market vacancy rates. The company has also recorded a $172 million unrealized reduction in the value of its portfolio. The trust posted a $141 million net loss in the nine months through March, while operating
earnings gained 6.5% to $47.12 million.

AMP NZ Office Trust shares fell 8.4% to 76 cents and have declined 17% this year.

James Lindsay, who helps manage $400 million at Tyndall Investment Management, said the plan puts AMP Office’s gearing well below its peers at around 30% and will add to pressure for more property trusts to raise funds.

“Everyone is trying to get to be the least risky, least geared,” he said. “I would be very, very surprised if we don’t see another one.”

GPT Group, an Australian real estate investment trust, today announced a capital raising target of up to A$1.7 billion as it exits a joint venture with the failed investment group Babcock & Brown Ltd.

GPT aims to raise A$1.1 billion selling shares to fund managers who are already shareholders at 35 cents apiece and raise A$120 million via a private placement to institutions. It will also seek to raise A$470 million from individual shareholders.

Businesswire.co.nz

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