On Feb 10, Link announced a one-for-five rights issue at HK$44.2 per rights unit. This is a 26% discount to the last traded price of HK$62.8 per unit as at Feb 9. The theoretical-ex price (TERP) is HK$59.7 per unit. The rights issue will raise HK$18.8 billion. George Hongchoy, CEO of Link adds that the rights issue is not related to the Singapore acquisition where local banks have lined up to finance the transaction.
Approximately 40% to 50% of the net proceeds will be used to repay HK$7-8 billion of existing debt and around HK$1-2 billion will be used to rest revolving credit facilities. “Given the high interest rate environment, we will be able to save financing costs,” says Ng Kok Siong, CFO of Link.
The balance will be deployed for pursuing future investment opportunities, with a focus on retail, car park, office and logistics sectors across Asia Pacific. Link has said none of the net proceeds has been earmarked for any specific investment opportunities.
The rights issue will lead to the unitholding base expanding by 20%, and hence cause a dilution in distributions per unit (DPU). “But, looking at how we are going to use proceeds in saving financing costs and parking this excess money before investment, earning deposit interest, we can get ready for investment opportunities that will come,” Ng adds.
Hongchoy alluded to the rights issue providing a boost to Link 3.0, where Link plans partnerships with capital partners to invest in properties, both directly and indirectly through private funds, where Link takes a more active asset management role. Hence Link may focus increasingly on a real estate investment manager (REIM) role.
Link started off in 2005 as an internally managed REIT holding suburban retail property and car parks in Hong Kong (Link 1.0) in its first 10 years. It expanded its asset class and into overseas markets such as mainland China, UK and Australia (Link 2.0). With the Singapore transaction where it is acquiring Jurong Point, Swing By @ Thomson Plaza, and the management contract for AMK Hub, Link’s management has embarked on a fee income trajectory.
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The Rights Issue is fully underwritten by the Lead Underwriters, namely HSBC, DBS and JP Morgan, subject to the terms and conditions of the Underwriting Agreement. HSBC is the Sole Global Coordinator of the Rights Issue.