CapitaMall's follow-on prices at bottom

The retail asset-backed Reit raises $243 million to pay down debt and decides not to use an option to increase the size of the deal.
Singapore's CapitaMall Trust confirmed yesterday that it had completed the follow-on sale of new units that it launched on Monday evening, raising a total of S$352.1 million ($243 million).

In a statement, the real estate investment trust that is backed by retail assets said the price had been fixed at the bottom of the offering range at S$3.63, which equals a discount of 3.2% versus MondayÆs volume-weighted average price. It also noted that the deal had been fully subscribed, but made no mention of the additional S$150 million worth of units that it had initial said it may sell ôin the event of a favourable response.ö

A source familiar with the deal clarified that the deal would not be increased beyond the S$352.1 million that the company has now raised and which will be used primarily to pay down debt.

The placement was launched with a price range of S$3.63 to S$3.70, but CapitaMall didnÆt offer a fixed number of units. Instead the number of units was to be adjusted to match the approximately S$150 million that the company had set out to raise. With a final price of S$3.63 it ended up selling 97 million new units, or 6.2% of its enlarged capital. The deal was jointly arranged by DBS and UBS.

The bottom-end pricing was partly a result of price sensitivity, although sources say investors submitted limit orders across the book and not only at the low end. In light of the volatile market environment and the fact that most Singapore Reits have been lagging the broader market in recent months, CapitaMall also saw little benefit from trying to squeeze another few cents out of the investors û especially since it was set to raise the same amount of money anyway, they say.

The fact that several existing unitholders participated in the offering likely also played a role here. According to CapitaMallÆs statement, about 30 investors bought in. It described them as long-term and said they came from Switzerland, offshore US, Europe, Asia and Australia. No further information on the level of demand was available as the bookrunners didnÆt communicate this to the investors.

Returning to the pricing, the discount was a slightly larger 3.5% when compared to MondayÆs close of S$3.76, but the follow-on units were sold without a right to the dividend that will be paid for the period from July 1 to the day immediately before the new units are issued. The trust management has earlier said that the divided will be somewhere between 4.83 and 4.93 Singapore cents per unit. When adjusting for this, the discount versus MondayÆs close narrows to about 2.2%, which must be considered a good outcome for the company.

CapitaMallÆs unit price fell as much as 3.7% to a low of S$3.72 when the trust resumed trading yesterday after a one-day suspension, but recovered to finish just one cent down at S$3.66. The trust will go ex-dividend today. The shares were suspended as the deal was kept open until 6pm on Tuesday. Sources said this was to ensure Asian investors were able to get a proper look at the offering, since the launch on Monday didnÆt happen until about 7pm on Monday, which is quite late in the day by Singapore standards.

The proceeds will go towards the repayment of S$453.6 million in short-term borrowings that had been taken up to fund earlier acquisitions of various assets, including a 20% stake in CapitaRetail China Trust (CRCT) that it bought at the time of the IPO in November last year. CRCT - the only Singapore Reit to be backed solely by Chinese asset - is sponsored by Singapore developer CapitaLand, which is also the sponsor behind CapitaMall.

As a result of the placement and the debt repayment, CapitaMallÆs gearing will fall to 34.9% from 40.7%. According to Pua Seck Guan, chief executive officer of CapitaMall Trust Management, this will not only enhance the trustÆs debt capacity further, but will also provide ôgreater financial flexibility to pursue yield accretive acquisition opportunities in Singapore.ö

The CapitaMall offering was launched on a busy night and had to fight for investorsÆ attention with the massive $1.41 billion top-up placement by Hong Kong developer Sun Hung Kai Properties. As reported earlier by FinanceAsia, the Sun Hung Kai placement saw strong demand and was fully covered within one hour despite being the largest non-marketed follow-on for an Asian real estate company ever. The Goldman Sachs-led offering ended up almost three times subscribed and attracted more than 100 investors.

Outside the property sector, an existing shareholder also sold S$208.5 million ($144 million) worth of shares in Singapore-listed Chinese shipbuilder Yangzijiang Shipbuilding on the same night. Joseph Lau, the chairman of Hong Kong-listed property firm Chinese Estates, offered 80.8 million shares, which represented his entire holding in the company at a price between S$2.58 and S$2.63. The deal was priced at the bottom of that range for a 3% discount to the latest close.

According to a source, about 25 investors participated in the deal, which was bookrun by Citi. Here too, existing shareholders accounted for a significant portion of the demand which helped keep the price at the low end. However, the share price has dropped 4.5% in the two days following the placement to a close of S$2.54 yesterday, suggesting the market is somewhat disappointed about LauÆs exit from the company.

Lau bought more than 80 million of his shares at S$0.95 apiece in YangzijiangÆs initial public offering in April when he acted as one of four cornerstone investors. Sources say he added slightly to that holding at a higher price during the summer, but his profit would still have exceeded S$130 million ($90 million). His initial investment was subject to a three-month lockup.
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