SINGAPORE (June 5): On May 29, 2019, Ascott Residence Trust’s (ART) manager announced that it has decided not to redeem its 4.68% $250 million of perpetual securities on June 30, the first call date. Instead, ART’s manager has opted for a reset. In the offering circular, the reset is priced at the five-year swap offer rate plus a fixed spread of 2.5%. The five-year SOR is at around 0.52%, translating into a coupon of 3.02%.

The advantage to ART is of course lower cost — if it resets the $250 million perpetual securities tranche at 3.02% a year, it would save up to $4.2 million annually. Last Octo- ber, ART refinanced $150 million perpetual securities at a lower rate of 3.88% in FY 2019 (from 5% previously), resulting in savings of $1.68 million annually.

Market conditions were not favourable for the issuance of perpetual securities. “I believe if ART called the 4.68% $250 million perpetual securities and refinanced it with a new issuance, the spread could have been high- er, and in a reset, the trust saves on issuance costs as well,” says RHB Group Research analyst Vijay Natarajan.

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