More reason as to why i bought more on close today.
ASX Release
12 May 2009
BJT ANNOUNCES SIGNIFICANT REDUCTION IN DISTRIBUTION HEDGING
Babcock & Brown Japan Property Trust (ASX: BJT) (the ‘Trust’) today announced that it has terminated at no cost slightly over half of its forward exchange contracts hedging future anticipated Yen distributions into A$. This has resulted in the removal of the 60% portfolio gearing ratio covenant associated with those contracts.
The termination leaves approximately 63% of future distributions (to December 2010) and approximately 21% of the Trust’s capital hedged from Yen to A$ and follows a sharp recent recovery in the value of the A$ against the Yen.
All remaining foreign exchange hedges are with a single counterparty and a summary of the Trust’s revised hedging position and the associated covenants are shown in the attached tables. Both the Trust and this counterparty have the right to terminate these hedges in August each year. The Trust continues constructive discussions with the counterparty.
Using the current Yen/A$ exchange rate the remaining distribution hedges are ‘in the money’ by approximately $5.4m and the capital hedges are ‘out of the money’ by approximately $34.0m, leading to a net ‘out of the money’ position of approximately $28.6m. This represents a significant reduction from a net ‘out of the money’ position on all the Trust’s distribution and capital hedges of $84.4m as at 31 December 2008.
Mr Allan McDonald, Chairman of Babcock & Brown Japan Property Management Limited, the Responsible Entity of the Trust, said “Following the significant and timely monetisation and reduction of capital hedges earlier this financial year, the closing out of these distribution hedges represents a further step towards a simpler and more conservative capital structure. The Board will continue to seek sensible methods by which we can advance this goal.”
Mr Eric Lucas, Senior Advisor to the Board, commented “Until recently the Trust has had a policy of hedging substantially all anticipated Yen distributions back to A$, however it has become clear that the benefits of this policy – providing medium term predictability as to the A$ level of distributions despite short-term
exchange rate movements – recently have been outweighed by unhelpful market uncertainty as to potential hedge terminations. We will continue to review the hedging policy to achieve a balance between these considerations.”
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