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Croesus Retail Trust increases hedging to protect it from falling yen
Croesus Retail Trust (CRT) has increased the amount of its distributable income hedged to approximately 100 per cent for the period up to Dec 31, 2015, a move to mitigate forex risks for more steady returns to investors.
Croesus Retail Asset Management, the trustee-manager of CRT explained that this decision comes as CRT looks to insulate all of its distributable income from a falling Japanese yen.
Commenting on the latest decision, Jim Chang, CEO and executive director of Croesus Retail Asset Management, said: "We have responded promptly to protect CRT and our investors from the unprecedented weakening of the yen, which has declined about 9.3 per cent in the past four months against the Singapore dollar. In the previous quarter, we had extended our hedges to cover at least 80 per cent of our distributable income up to Dec 31, 2015. Today, we are increasing our hedges to cover approximately 100 per cent of our distributable income to better manage the foreign exchange risks."
All of CRT's interest bearing liabilities are in Japanese yen (including the Singapore dollar 4.6 per cent Fixed Rate Notes due 2017 which proceeds have been swapped into Japanese yen at a yen fixed interest rate of 3.83 per cent per annum) and so there is a natural hedge and no currency mismatch against the assets on the balance sheet of CRT.
CRT's policy is to distribute 100 per cent of its distributable income for the period from the listing date (May 10, 2013) to June 30, 2015 and at least 90 per cent of its distributable income thereafter. CRT receives its distributable income in Japanese yen but pays out distributions in Singapore dollars to its unitholders semi-annually (for the six-month period ending June 30 and Dec 31 each year).