FLT and FCOT unitholders approve merger

Singapore

FRASERS Logistics & Industrial Trust (FLT) and Frasers Commercial Trust (FCOT) unitholders have voted overwhelmingly to approve a proposed merger, the managers of both trusts said on Wednesday. They also approved the proposed acquisition of Farnborough Business Park in the United Kingdom by the enlarged entity.

Voting took place at extraordinary general meetings (EGMs) and a Trust Scheme Meeting on Wednesday.

At FLT's EGM, the resolution on the proposed merger was approved with 99.85 per cent of the total number of valid votes cast. The resolution on the proposed allotment and issuance of new FLT units to FCOT unitholders as part of the consideration for the merger was approved with 99.78 per cent of votes cast. And the resolution on the acquisition was approved with 99.76 per cent of votes cast.

At FCOT's EGM, 98.51 per cent of the votes cast approved of the proposed merger. During the Trust Scheme Meeting after that, the trust scheme was approved by 86.8 per cent of FCOT unitholders present and voting, as well as 98.61 per cent of FCOT units represented by votes.

The merger, first proposed last December, will create one of the largest S-Reits listed here with a portfolio value of S$5.9 billion.

In a presentation to investors last month, FCOT estimated that the enlarged Reit would have a market capitalisation of S$4.2 billion, putting it among the 10 largest listed here.

The deal is taking place by way of a trust scheme arrangement, in which FCOT unitholders will receive S$1.68 per unit held. This consideration will be paid via a combination of 15.1 cents in cash and 1.233 new FLT units per FCOT unit.

Now that unitholders have approved it, the trust scheme will have to be sanctioned at a court hearing. The last day of trading for FCOT units is expected to be March 31.

Prior to the EGMs, Moody's had on Tuesday changed its outlook on all FCOT's ratings to negative. The ratings agency had placed FCOT's ratings under review following the announcement of the merger.

Moody's said that it believes FCOT will "continue to preserve its credit quality following the merger".

At the same time, "the funding structure of the acquisition at the FCOT level remains uncertain at this point of time", it added.

"The change in outlook to negative reflects the uncertainty related to the funding mix at the FCOT level for the proposed acquisition," said Sweta Patodia, Moody's lead analyst for FCOT.

Moody's negative outlook also takes into consideration the expectation that a prolonged outbreak of the coronavirus could impact FCOT's earnings and cash flows in line with the overall Reit sector.

Moody's also confirmed FCOT's Baa2 issuer rating, FCOT Treasury's Baa2-backed senior unsecured debt ratings and the (P)Baa2 rating on its backed senior unsecured medium-term note programme.

On Jan 8, FCOT had received consent from its bondholders to proceed with the proposed merger.

"This alleviates Moody's concerns with respect to FCOT's liquidity position because a merger without the consent from the bond holders is an event of default under its existing bond indenture, and could have led to acceleration of payment for the existing bonds," Moody's added.

Units of FCOT closed up S$0.03 or 1.9 per cent at S$1.62 on Tuesday. FLT units closed up S$0.03 or 2.5 per cent at S$1.23. Both had requested for trading halts on Wednesday before the market opened.