ESR-Reit to sell S$150m of 4.6% perpetual securities

ESR-REIT plans to sell S$150 million of 4.6 per cent perpetual securities under its S$750 million debt issuance programme to refinance existing debt and to pay for investments and development expenses.

The securities will be sold at 100 per cent of the principal amount, said ESR, a real estate investment trust (Reit) that holds a portfolio of industrial and commercial properties in Singapore.

The perpetuals may be called at par by ESR after five years. The distribution amount will be reset after the first call date to 260 basis points above the prevailing five-year Singapore-dollar swap offer rate.

Rating agency Moody's on Oct 21 affirmed ESR's investment-grade Baa3 rating, but downgraded its outlook to negative from stable, citing the expected debt burden from ESR's acquisition of Tuas South Lane.

"Assuming the acquisition goes ahead as planned, we expect ESR-Reit's leverage, as measured by adjusted net debt to Ebitda, to weaken materially to around eight times in 2018 compared to 7.2 times at Sept 30, 2017, which exceeds our downgrade trigger of 7.5 times," Moody's analyst Rachel Chua said.