Oxley Holdings - DBS Research 2019-05-02: Here I Come To Save The Day! Chevron House Sold


Oxley Holdings - Here I Come To Save The Day! Chevron House Sold

  • Chevron House is sold for S$1.025bn BUT with conditions.
  • Initial cash proceeds of S$210m will facilitate Oxley on the repayment of first tranche of retail bonds (S$300m) expiring on 5 November 2019.
  • Could further pare down debt upon completion of the transaction and conditions are met.
  • Buyer is the bigger beneficiary, in our opinion.

Chevron House is sold BUT with conditions.

  • OXLEY HOLDINGS LIMITED (SGX:5UX) finally inks the sale of Chevron House on 29 April 2019 (at least one of the two assets for sale is finalised) for S$1.025bn, as announced previously.
  • However, a few conditions are attached to the sale:
    • Oxley will be responsible for the implementation, execution and completion of the AEI Works.
    • Oxley will be responsible for the divestment of the retail and banking units of the Chevron House.
    • An aggregate sum of S$210m will be paid upon the first completion of the proposed sale, where 82.35% stake in Chevron House (under Oxley Beryl) will be transferred to the buyer.
    • The discharge of Oxley Beryl’s bank loans and payment of the balance of the consideration upon the final completion of the sale will take place after AEI works and the divestment of the retail and banking units of the property. The remaining stake will then be transferred to the buyer.
    • The transaction is subject to shareholders’ approval, if required by SGX.

Our thoughts

  • The devil is in the details. While we are unsure of the details on the terms attached between Oxley and the buyer with regards to the divestment of the retail and banking units and any other terms and conditions, if we assume that the first tranche of payment of S$210m is potentially the maximum gain/cash proceeds to be received by Oxley for the sale of Chevron House, we believe the cash received will alleviate some of Oxley’s urgent cash requirements though not completely.
  • There will be further deleveraging when the buyer assumes the Chevron House’s bank loans upon completion of the transaction when conditions are met.
  • Just to recap, Oxley has two tranches of retail bonds expiring; S$300m expiring on 5 November 2019 and S$150m expiring on 18 May 2020. The first tranche of cash proceeds will probably facilitate its immediate repayment of the first tranche of retail bonds.
  • Aside from the retail bonds, Oxley has S$238m of corporate borrowings expiring in FY20/21 and S$631m EMTN expiring in FY21/22.
  • Based on the available information and our ballpark estimates (previously), we believe the buyer (market talk seems to suggest AEW) is the bigger beneficiary of this transaction by acquiring the office component of Chevron House at below 4% cap rates with reversionary potential close to 5% cap rates. This has yet to factor in any potential plot ratio upside from the government schemes to incentivise the redevelopment of CBD.

Rachel TAN DBS Group Research | Derek TAN DBS Research | https://www.dbsvickers.com/ 2019-05-02
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