SIAS - First REIT Virtual Dialogue Session key highlight

SIAS - First REIT Virtual Dialogue Session was conducted on 7th Jan 5pm.

You can view the recording here and Q&A here.

Key Highlight

3 main issues:

• First Reit foresee that Lippo Karawaci (LK) will default as LK have been in negative cashflow since 2015 [LK contribute 72.1% of rental income]
• Unable to refinance as Bank are not lending due to concerns over LK (Deal breaker)
• Soon to expire of 5 Master lease by end 2021

The board had looked through all options such as divestment of asset and concluded that rights is the best options due to the short timeline.

Legal procedure option will be lengthy (Time), Costly and Complicated.

Divestment option will not be ideal as bid price received will not be attractive due to COVID.

New operator option is not ideal as existing infrastructure might not suit new operator 

  

Rights is urgently needed, else LK will have a vey high chance of default.

If approval was not obtained during EGM (to be held on 18 Jan Mon):

There is no Plan B 

Post rights (If approved during EGM):

Gearing will drop to 34%

No loan repayment in 2021

OUE Limited might have a near 60% ownership if assuming they take up all the unsubscribed rights, thus resolution 2 is needed for.

Restructure, Recapitalization and Reposition to become FIRST REIT 2.0

FIRST REIT 1.0 (Current) --------------------------> FIRST REIT 2.0 (Post rights)

Concentrated risk                                                                 Diversify

Unsustainable                                                                        Sustainable

Potential default                                                                   Avoid default

WALE 7.4 years                                                                    WALE 12.6 years

Uncertainty                                                                            Clarity 

Lack of confidence from shareholders                               Instill shareholders confidence

Related post:

1) Increased my FIRST REIT from 48,000 shares to 75,300 shares

2) FIRST REIT: 75,300 -> 0 shares (Part 2)

3) First REIT AGM 2020

4) Added: FIRST REIT (Jan 2020)

5) Added: FIRST REIT (Jan 2020) again