Pros and cons of the distribution reinvestment plan

Goola Warden
Goola Warden5/18/2022 09:26 PM GMT+08  • 10 min read
Pros and cons of the distribution reinvestment plan
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On April 22, stapled security holders of CDL Hospitality Trusts (CDLHT) voted overwhelmingly to approve resolution 4, the implementation of a distribution reinvestment plan (DRP).

In a 24- page circular on the rationale for DRP, CDLHT’s manager said: “the cash which would otherwise have been payable by way of distributions may be retained for greater financial flexibility where the cash may be used to repay existing borrowings, which will further strengthen CDLHT’s balance sheet, or to fund the continuing growth and expansion of CDLHT.”

It adds: “[The DRP] will also enlarge CDLHT’s capital base, strengthen its working capital reserves and improve the liquidity of stapled securities.” Unitholders can opt for distributions in all cash, cash and units, or all units.

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