Accordia Golf Trust to distribute 1.2b yen reserves

ACCORDIA Golf Trust (AGT) said on Tuesday that the sum of 1.2 billion yen (S$15.7 million) that was set aside as reserves in the March quarter will be distributed, given that the impact of Covid-19 was not as adverse as projected.

AGT, the first business trust comprising investments in golf course assets in Japan to be listed on the SGX-ST, was responding to an open letter by Hibiki Path Advisors, which owns 7.2 per cent of AGT. The letter had sought explanation for the 1.56 billion yen reserves that reduced AGT's latest semi-annual payout by almost half. 

With the 1.2 billion yen to be distributed, the remaining 362 million yen represents estimated transaction costs relating to the non-binding offer from Accordia Golf for the potential divestment of AGT's interests in all of its golf courses, said AGT in its regulatory filing. It added that the process had been prolonged as a result of the pandemic, but will be completed around June 2020. 

It also explained that the initial 1.2 billion yen was set aside for Accordia Golf Asset Godo Kaisha (SPC) to "comply with certain financial covenants". The covenant requires SPC to ensure the amount of current deposit (the balance as at the last day of each month) is no less than three billion yen for three consecutive months. 

A breach could lead to the lenders withholding the cash available for distribution by SPC to the investors of the Tokumei Kumiai interests. 

"The decision to make the 1.2 billion yen special reserve was undertaken during the initial stages of Covid-19, when there was a lot of uncertainty on the extent of the adverse impact on SPC's golf business," said AGT.

The declaration of a state of emergency by the Japanese government from April 11 to the last week of May added to the impact on SPC's financial performance. Against the backdrop of the pandemic and potential consequences of the breach of the covenant, the 1.2 billion yen reserve was therefore set aside to minimise the risks.

However, the impact of Covid-19 on SPC's performance was "not as adverse as expected" and consequently, the risk of SPC's cash balance potentially falling below three billion yen for three consecutive months in the near term, even without the reserve, is lowered as well. 

The trustee-manager will be seeking consent from the lenders to SPC to distribute the 1.2 billion yen reserve. After consent is obtained from the lenders, details of the books closure date for this special distribution as well as the payment date will be announced.