Deals revive bankers' interest in AustralandFont Florence Chong | April 17, 2009 Article from: The Australian AUSTRALAND'S Australian bankers have agreed to refinance more than $500 million of its debt, due this year.
The property group's units surged 26 per cent at one point yesterday on the news before closing at 7.5 per cent higher at 35.5c.
But the company warned that its operating profit forecast this year would be 30 per cent lower than the $174.8 million in 2008 and there could be further asset writedowns.
The majority Singapore-owned Australand, one of Australia's largest diversified property companies, is rolling over $563 million in commercial mortgage-backed securities (CMBS).
Australand managing director Bob Johnston told shareholders at the company's annual general meeting in Sydney yesterday it was negotiating with Australian banks to repay $350 million to its CMBS noteholders.
He said Australand would pay the balance of $213 million from available liquidity of $560 million at March 31.
A major Australian bank had agreed to a $100 million three-year facility, he said.
The company secured an agreement from three major domestic banks to fund a further $250 million. The credit had been approved and it was now subjected to documentation.
As well as the CMBS, Australand had renewed $100 million out of $150 million of unsecured loans with its lenders for another one-year term. He said negotiations were continuing for the remaining $50 million.
The company had no further debts maturing this year and was working on $1.025 billion due next year, Mr Johnston said.
Shaw Stockbroking industrial research head Scott Marshall said the group's debt problems had weighed heavily on the stock and investors were obviously relieved that the CMBS would be repaid.
"The CMBS market has completed dried up and it would not be able to roll over the notes, so it is positive news that it has managed to replace it with bank finance," he said.
The banks had, however, tightened the covenants on other debt from 60 per cent to 55 per cent, he said.
The new gearing covenant could be a problem for the company, especially as asset prices were under pressure, Mr Marshall said.
Mr Johnston said reducing the gearing covenant was a condition for cutting its interest ratio covenant from 2.5 times to two times.
The company would still have sufficient headroom to operate in this "challenging environment".
"We met all our covenants in 2008 and they will continue to be met," he said.
He warned shareholders, however, that assets were expected to keep declining.
Australand had signed contracts to sell eight assets -- at an 8 per cent discount to book value -- for about $76 million.
The Australian company is 59.3 per cent-owned by CapitaLand, Southeast Asia's largest property group, which injected $302 million into the Australian unit during a $460 million capital raising last year.
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