Saizen REIT still has S$123m of loans to refinance by year-end

The recent credit crunch has hit real estate investment trusts (REITs), making it difficult for them to refinance loans.

Japan-based Saizen REIT said it will have S$123 million worth of loans – which are in the form of commercial mortgage backed securities (CMBS) – to refinance by the end of the year. This is despite a strong showing of support from shareholders for a planned rights and warrants issue.

The trust said it has received strong support from a core group of shareholders for a proposed S$44.75 million rights and warrants issue that is expected to be launched in June. That group accounts for about half of its shareholders.

“When we approached them about the need for doing this rights issue to enhance the equity base so as to facilitate the refinancing discussions and negotiations, they were very supportive,” said Sean Pey Chang, CEO of Saizen REIT.

While a successful rights issue will give Saizen a buffer to work with, taking into account the contribution of the rights issue, the firm said it will still have S$123 million in loans to refinance by the end of the year.

Saizen said it has been taking steps to ease this pressure since the credit crunch first surfaced.

“What we have been doing in the past one and a half years since listing is to progressively replace these CMBS loans with traditional bilateral bank loans. We have been successful in the past year in replacing a quarter of such loans,” said Saizen REIT’s CEO.

Observers said the outlook for the trust is gloomy. Ratings agency Moody’s has downgraded the firm, citing concerns about its outstanding CMBS. It also warned the REIT that it is running out of time to find adequate refinancing in the current tight market.

Source : Channel NewsAsia – 1 Apr 2009

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