First Reit unit-holders vote in favour of proposed restructuring

UNIT-HOLDERS of First Reit on Tuesday voted overwhelmingly in favour of the proposed restructuring of the Lippo Karawaci (LK) master lease agreements (MLAs), as well as the whitewash resolution waiving the right to receive a takeover offer from First Reit's substantial shareholder, OUE.

At the Reit's extraordinary general meeting held on Tuesday, unit-holders representing some 91.33 million units, or 91.25 per cent, voted in favour of the first resolution related to the proposed restructuring.

As for the whitewash resolution, unit-holders representing some 90 million units, or 90.5 per cent, voted in favour of it.

Stephen Riady and James Tjahaja Riady, each regarded as controlling unit-holders of First Reit and controlling shareholders of the Reit's manager, abstained from voting on the first resolution. They did so alongside their associates, which include OUE Limited, OUE Lippo Healthcare Limited and the manager.

Chief executive of the manager Victor Tan, as well as Christopher James Williams and Minny Riady, who are all non-independent directors of First Reit's manager, also abstained from voting on the proposed restructuring.

The restructuring of LK's MLAs with First Reit comes amid the risk of LK defaulting on its obligations under the existing terms, given that it has been in a negative cash flow position since 2015.

The board and the management of First Reit had earlier said that the financial distress it is facing came as a result of the soft Indonesian property market, with the issue further exacerbated by the weakening of the rupiah, as well as the Covid-19 pandemic.

In FY2019, First Reit's 11 MLAs with LK constituted about 72 per cent of the Reit's rental income.

Pertaining to the second resolution, First Reit, which is similarly facing financial difficulties, had proposed a 98-for-100 renounceable rights issue at S$0.20 per unit to raise gross proceeds of S$158.2 million.

Unit-holders did not vote directly on the proposed rights issue; instead, they voted on a proposed waiver by unit-holders other than Clifford Development (CDPL) and its concert parties of their rights to receive a general offer for their units in First Reit from CDPL.

First Reit now has about S$400 million in debts, of which S$196.6 million is due on March 1.

It plans to use about S$140 million of the S$158.2 million in gross proceeds raised to repay its upcoming debt; the remaining money will be set aside for professional and other fees incurred, master lease restructuring costs and working capital.