OUE Commercial REIT - Placement of new shares to pare down gearing
- OUE Commercial REIT (OUECT) recently reported it has placed 233.3m new units at an issue price of S$0.643 per new unit, which raised gross proceeds of approximately S$150.0m.
- The issue price represents an 8.1% discount to the volume weighted average price of S$0.6993 per unit on 8 Mar 2017, and the gross proceeds will be used to partially repay OUECT’s existing borrowings.
- As at end 2016, given that the trust’s aggregate gearing was nearer the higher end of the spectrum versus its peers at 39.8%, we see this as a positive move that will lower OUECT’s gearing about approximately 4.3% and further strengthen its balance sheet.
- We also note that, to mitigate interest rate volatility, about 79.3% of OUECT’s borrowings are on a fixed rate basis with an average term of fixed rate debt of 2.5 years.
- Maintain HOLD on OUECT with an unchanged fair value estimate of S$0.65.