Galileo Japan Trust has launched a rescue package to raise $153 million through an insitutional placement in an attempt to stabilise its capital structure and allow for the reinstatement of distributions.
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While its diversified portfolio of retail and offices assets are said to generate solid rents, the debt was deemed unmanageable and in need of restructuring.
At the 2013 year results to June 30, the directors revealed that unless the senior loan due in March 2014 of $399.1 million, was refinanced, it was unlikely the Trust would be able to meet its financial obligations.
Under the refinancing propsals, the trust would also look to issue new Eurobonds by the Japanese TK business (the direct owner of the assets) to raise ¥6 billion ($68.2 million) and to refinance the existing senior loan with a new ¥30 billion ($340.9 million) 5 year debt facility.
The units are to be offered at $1.50 apiece and Galileo Funds Mangement will participate with a $5 million investment in the placement.
Galileo was founded by Neil Werrett, a co-owner of the champion racehose Black Caviar, and listed in December 2006. It owns 21 properties across Japanese with a value of about $650 million.
Galilieo’s fund management’s chief operating officer, Peter Murphy, said yesterday the proposal effectively represented a relaunch of trust and would allow distributions to be reinstated.
He said the loan from Forum Partners and Mr Werret had also been repaid as part of the latest funding scheme.
‘‘It stabilises the balance sheet and provides an attractive investment opportunity for both existing and new investors alike. Following implementation the earliest loan maturity will be October 2018 and 83 per cent of debt will have a fixed cost for a minimum of 5 years with no loan to value covenants or principal amortisation,’’ Mr Murphy said.
“With the Japanese government implementing a range of strategies to stimulate economic growth and inflation, improving real estate market fundamentals and Tokyo winning its bid to host the 2020 Olympic Games the period ahead looks positive for Japan.’’
Mr Murphy said based on the offer price of $1.50, the new units in the trust were forecast to provide a 2014 financial year annualised distribution per unit yield of 10 per cent which would be 100 per cent tax deferred.
For the 2013 year, the trust reported an underlying funds from operations gain of $8.8 million compared to a $470,000 loss in the previous corresponding period.
