Saizen REIT defaults on S$113m loan but unlikely to affect other portfolios, loans

Mainboard-listed Saizen Real Estate Investment Trust said it has defaulted on a commercial mortgage-backed securities loan worth 7.3 billion yen or about S$113 million.

It said despite efforts since early last year, it was unable to find a commercially viable solution before the maturity of the YK Shintoku loan.

The loan is non-recourse and Saizen said the default is not expected to affect its other portfolios or loans.

And it said this is also not expected to affect its ability to operate as a going concern or impair its ability to obtain further financing from financial institutions.

Saizen said the main impact of the maturity default is an increase in the interest rate from 3.07 per cent to a default rate of 7.07 per cent a year.

It doesn’t expect immediate foreclosure by the lender and it said refinancing of the loan is still possible with the consent of the lender.

The REIT said in the event of a foreclosure, the pro forma impact on its net asset value will be a reduction of about 10 per cent.

Meanwhile, CEO of the REIT’s manager, Chang Sean Pey, said efforts to refinance the loan will continue.

He said: “CMBS default is not uncommon in Japan in the past one year. And all this is because the CMBS market basically shut down after the credit crisis. We are continuing talks with banks on the refinancing. It’s just that we need time but we’re continuing to work on that.”

Mr Chang added that the lender is currently in talks with four banks about the refinancing of this loan.

The property trust said it expects to fully repay its other loans maturing over the period from this month to January next year.

Source : Channel NewsAsia – 3 Nov 2009

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