NEWS - Financial Services
Published 9:27 AM, 27 Oct 2009
Last update 4:26 PM, 27 Oct 2009
ING Industrial Fund to raise $700m
By a staff reporter, with AAP
ING Industrial Fund (IIF) says it will undertake a deeply discounted $700 million fully underwritten capital raising to repay debt and boost its balance sheet, and has forecast a 2011 net operating income per unit of 4.17 cents.
Chief executive Paul Toussaint said the capital raising, priced at a 20 per cent discount of 48 cents per unit, would strengthen the property trust's balance sheet and significantly improve covenant headroom.
"IIF will have increased financial flexibility which will enable management to evaluate earnings enhancing portfolio initiatives, including development of owned assets as market conditions improve and capitalising on acquisition opportunities," Mr Toussaint said.
IIF said the fundraising - comprising of a one-for-one entitlement offer of $554 million and a $156 million institutional placement - would also enable it to reintroduce distribution payments, with the next distribution payable for the quarter commencing January 1, 2010.
Based on the raising, IIF's pro-forma balance sheet gearing will decline to 33.5 per cent, from 53.9 per cent. The fund's borrowings in Australia will be reduced to $900 million from $1.6 billion.
The fund, which invests in industrial properties in Australia, Canada and Europe, also said it expected to sustain a net operating income per unit of 4.17 cents.
"Calendar year 2010 NOI [net operating income] per unit forecast is 4.17 cents, representing a yield of 8.7 per cent on the offer price," IIF said.
"Management believes that IIF’s NOI will be sustained at this level for financial year 2011."
IIF's capital raising complements other initiatives such as the renegotiation of a $1.6 billion senior secured debt facility and the sale of assets over the past 18 months for proceeds of more than $300 million.
Units in IIF were placed in a trading halt earlier on Tuesday, having last traded at 60 cents each.
Fund to re-start distributions policy
The fund said its distribution payout policy had been revised to reflect changed market conditions and is align it more closely with adjusted funds from operations.
"Upon completion of the raising, IIF will be well positioned to execute its portfolio and investment strategies and importantly recommence distributions," Mr Toussaint said.
"Australia's economy is stable and does present growth opportunities.
"We're seeking outperformance through the cycle and therefore we look to acquire assets and manage assets in prime locations with buildings and improvements that are suited to a wide range of users," he said.
The fund has forecast a distribution of 3.21 cents for the 2010 calendar year.
The planned payout equates to 77 per cent of estimated net operating income for the year, or 90 per cent of adjusted funds from operations.
Its 2010 net operation income per unit forecast is 4.17 cents, representing a yield of 8.7 per cent on the offer price per unit.
"Management believes that IIF's net operating income will be sustained at this level for financial year 2011," it said.
Eyes portfolio acquisitions
IIF said the proceeds of the raising would go towards repaying debt and strengthening its balance sheet, enabling it to seek potential portfolio acquisitions "to enhance earnings".
The fund said it would continue to focus on high quality industrial and business park assets in the Australian market.
"IIF sees Australia as its primary market and will look to re-weight more of its capital accordingly via acquisition and/or development activity," the fund said.
IIF also said it planned to exit the European market.
"IIF will target a phased exit in Europe as the market stabilises."
The institutional unit placement and entitlement offers open on Tuesday and will close Wednesday.
The retail entitlement offer opens on November 3 and closes on November 11.
Earlier today the fund's responsible entity, ING Management Ltd, requested a trading halt "pending the release of an announcement by IML [ING Management] on capital management initiatives."
The trading halt is expected to be lifted on October 29.
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