Goodman refinancing takes shape Carolyn Cummins June 20, 2009
INVESTORS in the Goodman Group should know within the next five weeks the terms of its refinancing deal, which is likely to take the form of a $1 billion rights issue.
The global industrial fund this week announced a deal with the Chinese Investment Corp (CIC), which involves a $200 million loan and the issue of options.
When combined with a separate options deal with Macquarie Bank, the amount involved is $585 million. Brokers said funding was only the first step in the group's refinancing plans.
The deals were also viewed as a clear indication that lower prices in Australian commercial real estate were proving attractive to overseas investors.
Analysts said further deals could be expected as overseas economies started to show an improvement with tight credit conditions starting to thaw.
This could lead to another wave of takeovers among real estate investment trusts.
Citi's property analyst, Peter Cashmore, said that by taking a secured-debt position, CIC had obtained an instructive inside look at the Goodman business.
"Having bulked up its debt capacity, albeit on a short-term basis, the second step in the Goodman recapitalisation story is finding a holistic solution to its capital management needs beyond these bridging deals," Mr Cashmore said.
The obvious solution, he said, was a sizeable rights issue which, assuming a price of 35 cents, would raise $973 million. This would "substantially pay outstanding debt through to 2010-11".
JP Morgan's property team said CIC had provided Goodman with financing worth $200 million with conversion options. If converted, Macquarie and CIC would own a combined 19.4 per cent of Goodman.
"We see CIC as a well capitalised and strong long-term strategic partner for Goodman," one broker said. "The financing facilities give Goodman until at least February to fix the structural issues of its business. It remains a work in progress.
"The next steps include recapitalising the managed funds and raising head stock equity. A capital raising is likely to be completed after some progress has been made with the managed funds. The next raising needs to fix the structural issues."
An analyst said the risk for Goodman was its share price which was beyond its control while it tried to make progress in recapitalisation. However, if the price dropped too low, "there is a possibility CIC might take the whole vehicle out", the analyst said.
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)