EC World Reit suspends trading in midst of financing woes
UNITS of EC World Real Estate Investment Trust (EC World Reit) have been suspended from trading effective Thursday (Aug 31). This is after its manager said the Reit and its subsidiaries, or ECW Group, were unable to fully repay their offshore interest expenses due the same day.
The Reit’s suspension comes after its manager flagged a “high risk” of non-collection of outstanding rent receivables.
To recap, EC World Reit and its subsidiaries are owed more than 145.8 million yuan (S$27.5 million) in overdue rent receivables by their sponsor group Forchn Holdings and its subsidiaries.
The rent receivables are spread across ECW Group’s four master-leased properties in China, including Fu Heng Warehouse.
As at Aug 28, its manager noted that ECW Group’s free cash had been significantly depleted due to a refinancing exercise in 2019, where it repaid about S$131.1 million to its lenders – out of which S$56.8 million was funded by the group’s excess cash.
The offshore interest reserve maintained by ECW Group is required to be topped up within five business days of its release.
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The Reit manager said that it expects meeting such a requirement to be “challenging” given ECW Group’s financial position, unless the sponsor group manages to pay a “sufficient” amount of the rent receivables within the given timeframe.
Breaching this requirement would also trigger a cross-default under ECW Group’s existing onshore facilities. The manager noted that this may prompt relevant lenders to accelerate the facilities, or in other words, demand repayment. It has requested these lenders not to do so.
It also asked the offshore facilities’ agent to release part of its offshore interest reserve such that ECW Group may fully repay the offshore interest expenses.
EC World Reit’s manager is further seeking an extension of time to top up the said offshore interest reserve.
Relevant lenders of the facilities are in the process of reviewing these requests, said EC World Reit’s manager.
A voluntary trading suspension would, therefore, be in the best interest of unitholders, it added, as this would ensure no trading takes place without sufficient information required to make an informed decision.
EC World Reit’s manager said that it will seek to lift the trading suspension as soon as appropriate without compromising the interests of the Reit’s unitholders.
Its board is also in the process of “evaluating various options” for the Reit, the manager added.
EC World Reit units last changed hands at S$0.28 on Monday. The counter has been untraded since.
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