First Reit makes cash offer for S$60 million in perpetual securities

FIRST Real Estate Investment Trust (First Reit : AW9U 0%) on Monday (Aug 22) launched a tender offer to buy back S$60 million in Series 002 subordinated perpetual securities in cash, at 70 per cent of the principal amount.

On top of the purchase price, First Reit will also pay the accrued - but unpaid - distribution on all securities accepted for sale.

Standard Chartered Bank (Singapore) has been appointed as the dealer manager of the invitation.

In its bourse filing, the management of First Reit said the rationale for its offer is to “provide liquidity to the securityholders given the illiquid nature of the outstanding securities”, and to optimise the trust’s debt capital structure as part of its continuing capital and liability management initiatives.

Securityholders have until 5 pm on Sep 2 to submit their tender application forms, ahead of the settlement date on Sep 9.

Based on Bloomberg data, the last quoted price of the perpetual securities on Aug 19 was S$62.613 .

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Proceeds from the perps when issued in 2016 were for refinancing existing borrowings, general working capital and capital expenditures.

After the 5.68 per cent perpetual securities were not redeemed on their first call date on Jul 8, 2021, the distribution rate was reset at 4.9817 per cent per annum for the period from the first reset date, to the next one 5 years later.

At the time, First Reit’s manager cited an uncertain economic environment and unfavourable market conditions as reasons for allowing the distribution rate for the perps to be reset.

Drawing down on debt to redeem the perps would increase First Reit’s leverage and reduce debt headroom available for acquisition opportunities and asset enhancement initiatives during a market recovery, added the manager in a bourse filing filing dated July 7, 2021.

In April this year, First Reit raised S$100 million through the issuance of 3.25 per cent 5-year healthcare social bonds in conjunction with the launch of its social finance framework for the issuance of social finance instruments (SFIs).

Proceeds from the fundraising were used to refinance the issuer’s existing term loan which was maturing in May 2022, with any excess amounts to be used in the manner agreed with the bonds’ guarantor.

SFIs are bonds and loans granted to attain specific social benefit outcomes and to fulfil United Nations sustainability development goals – specifically the goal of “good health and well-being”.

All proceeds raised from the SFI issued by First Reit are earmarked for the financing and/or refinancing assets, costs and investments that meet social eligibility criteria.

Units of First Reit closed flat at $0.28 on Monday