With gearing only 30% post rights issue, I genuinely expect ALZ...

With gearing only 30% post rights issue, I genuinely expect ALZ to redeem prefs within next two years. With step up, debt is expensive and with Capitaland behind them, I do believe they will redeem prefs either by cash or conversion to equity. In meantime, returns are attractive:
For various redemption dates (cash or equity, equivalent per annum returns as follows): My guess Dec09 most likely.

31-Dec-08 54%
31-Mar-09 41%
30-Jun-09 34%
30-Sep-09 30%
31-Dec-09 27%
31-Mar-10 25%

I do not own ALZ, only AAZPB.

It is a long wait to prove who is right on redemption but I predict share price will not get down to rights issue level in short term. See today's press which I read as positive:

Downturn hits Australand as profit fallsFont Size: Decrease Increase Print Page: Print Florence Chong | July 29, 2008
CASHED-UP Singapore property group CapitaLand will inject $302 million into Australand after the Australian property group announced a surprise rights issue while announcing its half-year results yesterday.

Australand Property Group reported a 79 per cent fall in first-half profit after writing down $34.7 million from some projects due to the downturn in the NSW residential real estate market.

Net profit for the six months to June was $25.55 million, down from $119.6 million a year ago.

Contributing to the profit decline, the company also revalued its investment property assets down by $7.3 million.

To help it through the downturn, it will now raise between $302 million and $557 million in a renounceable one-for-one entitlement offer and use some of the proceeds to pay down debt.

The units are being offered at 60c each -- a 38.5 per cent discount to Friday's closing price of 97.5c. The offer won't be underwritten.

Australand's key security holder, CapitaLand, has committed to take up its full entitlement.

Aegis Equities Research analyst Sam Haddad said: "The raising is positive for their capital position and will put them in a better position to fund developments."

He said investors were likely to be confident in taking part because the major shareholder was taking up the offer.

The issue will almost double the number of units on issue.

Australand chief executive Bob Johnston said if no one else took up the offer, Australand would lift its holding from 54 per cent to 70 per cent.

Analysts in Singapore who follow CapitaLand said the Singapore company raised $S3 billion this year to buy undervalued assets.

Senior investment analyst with Daiwa Institute of Research David Lum said the main reason for CapitaLand raising its investment was to recapitalise Australand.

Another analyst suggested that it was not entirely out of the question that, if CapitaLand ended up with 70 per cent of Australand, it could consider taking it private.

"If Australand is trading at a huge discount and there is no liquidity in the Australian market, CapitaLand may well consider privatising it," the analyst said.

Depending on the investor take-up, the raising will cut the company's gearing to between 29.9 per cent and 36.3 per cent from the current 43.8 per cent.

A Sydney-based fund manager who owns the stock in his portfolio said Australand was raising capital now for fear that the debt market could worsen next year.

"It is certainly cheaper to raise equity than raising debt," the fund manager said.

Australand said it was within its debt covenant and had managed to extend its credit facilities to June 2010 and increased them by $350 million.

Mr Johnston said if the rights issue was fully underwritten, it would reduce AustraLand's gearing from 43.8 per cent to 30 per cent but, if only CapitaLand subscribed, gearing would still fall to 36.3 per cent.

If current security holders renounced their rights, the Macquarie Group would undertake a bookbuild for new investors.

The company is forecasting its full-year net profit to fall at least 34 per cent to between $171.6 million and $176.6 million, excluding property revaluations and one-off non cash items.

Australand maintained its interim distribution per stapled security at 8c.

Australand shares are in a trading halt after last trading at 97.5c, having fallen 58 per cent this year.