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Eagle Hospitality Trust IPO's public offer undersubscribed amid market volatility
EAGLE Hospitality Trust (EHT)’s initial public offering (IPO) saw less than half of its stapled securities subscribed under the public offer, resulting in the joint bookrunners and underwriters having to take up the bulk of the allotment of unsubscribed stapled securities.
A portion of the unsubscribed stapled securities was also re-allocated to the international placement, the stapled group’s managers said in an exchange filing on Thursday night.
The stapled group is expected to start trading on the SGX-ST on a “ready” basis at 2pm on Friday, May 24.
Its IPO comes shortly after that of Singapore-based stapled trust ARA US Hospitality Trust, which is now trading below its IPO price.
ARA US Hospitality Trust priced the IPO of its 38 Hyatt select-service US hotels at 88 US cents per stapled security, and began trading on May 9. It was trading flat at 86.5 US cents as at 11.22am on Friday.
Equity markets have generally suffered of late, with investors gripped by concerns over US-China trade tensions. Singapore shares have hit a four-month low, with the Straits Times Index (STI) slipping 0.27 per cent to 3,152.25 as at 9am following a Wall Street sell-off overnight.
In EHT’s IPO, no applications were received for about 60 per cent or 26.6 million stapled securities out of the 44.9 million available to the Singapore public for subscription, at the close of the public offer on May 22. The subscription rate for the public offer is therefore 0.4 times.
About 25.3 million of those unsubscribed stapled securities are thus being underwritten by the joint bookrunners and underwriters.
Meanwhile, some 1.3 million were re-allocated to the international placement to “satisfy an indication of interest received”, the managers said. The placement tranche was fully subscribed.
The joint bookrunners and underwriters comprise DBS Bank, Merrill Lynch (Singapore), UBS Singapore Branch, BNP Paribas, Deutsche Bank Singapore Branch, and Jefferies Singapore. DBS Bank was also the sole financial adviser and issue manager for the IPO.
EHT offered a total of 580.6 million stapled securities at US$0.78 apiece for its IPO, comprising an international placement of about 535.7 million stapled securities to investors, including institutional and other investors in Singapore, and the offering of 44.9 million stapled securities to the public in Singapore.
The issue price of US$0.78 per stapled security falls below an earlier indicative range of US$0.80 to US$0.81.
Based on this issue price, projected annualised distribution yield will be 8.2 per cent for the forecast period of May 1, 2019 to Dec 31, 2019, and 8.2 per cent for 2020, according to the managers’ filing on Friday morning.
This is up from the 7.9-8 per cent range for forecast period 2019, and 8.1-8.2 per cent range for 2020 spelt out in its preliminary prospectus late last month.
Salvatore Takoushian, chief executive and president of the managers, told The Business Times last week that the lower-than-indicated IPO price of US$0.78 offers “more potential upside”.
EHT’s first distribution will be for the period from the listing date, May 24, 2019, to Dec 31, 2019, which the managers will pay by March 30, 2020. Subsequent distributions will take place on a semi-annual basis, for each six-month period ended June 30 and Dec 31.
It will distribute its entire annual distributable income for the period from May 24, 2019 to Dec 31, 2020. Thereafter, it will distribute at least 90 per cent of its annual distributable income.
EHT is a hospitality stapled group comprising Eagle Hospitality Real Estate Investment Trust and Eagle Hospitality Business Trust.