(19-11-2014, 08:27 AM)GreedandFear Wrote: [ -> ] (19-11-2014, 05:28 AM)PekingDuck Wrote: [ -> ] (18-11-2014, 11:21 PM)Boon Wrote: [ -> ]Looks like a pre-emptive move to me - ha-ha !
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________________________________________________________________________________________________________________
Update on the Refinancing of The Place
Pursuant to Rule 704(31) of the Listing Manual of Singapore Exchange Securities Trading Limited, the Directors also wish to announce that on 18 November 2014, an inter-creditor agreement was entered into with ICBC HQ, CMBCN and Industry and Commercial Bank of China(Asia) Limited (the "Covenantees")pursuant to which it was agreed that prior written consent of the Covenantees shall be obtained if Nan Fung International Holdings Limited, a holding company of the Trustee-Manager:
(a) ceases to be the controlling shareholder of the Trustee-Manager; or
(b) ceases to be the largest unitholder of Forterra;
in the event of breach of any of the above obligations, the covenantees, at its option, shall have the right (but not the obligation) to call an event of default under its respective loan and accelerate the
repayment of the said loan(collectively, the “Covenants”). If an event of default is called, the relevant loanwill be required to repay in full.
As at the date of this announcement, the Covenants have not been triggered.
http://infopub.sgx.com/FileOpen/Update%2...eID=325266
Boon, as of a few weeks ago, it was announced that the re-fi on the place would be at a blended rate of 5.18%. We now have two fixes of RMB 500 and 800m at 7.36% and 6.55% respectively. So either we refix the remaining USD 300m at a very low rate (<4%) to achieve this or the prior release is not achievable..?
pre-emptive by NF in defending their shareholding from an attack by another shareholder in building a stake above their current holding? Surely this would trigger a sale of all assets to meet a potential repayment of the total SGD loan amount?
Sorry, confused..
PK
I wouldn't read too much into this covenant. It is fairly standard for a bank to ask for an ownership covenant. That way, if there is a change in the controlling shareholder, the banks get a chance to relook at their exposure but, most likely (if the new major shareholder is credible) they will just waive or amend the covenant.
I believe interest rate of < 4% is achievable for the remaining tranche of the USD loan. Have to wait and see.
The previous management never disclosed any similar loan related “ownership covenant” before.
The covenant of the interest rate swap (IRS) was disclosed in August this year:
http://media.corporate-ir.net/media_file...082014.pdf
Under the terms of the Swap Facility, if Nan Fung International Holdings Limited, a holding company of the Trustee-Manager, ceases to own, whether directly or indirectly through its subsidiaries or nominees:
(a) 100 per cent. of the paid-up share capital of the Trustee-Manager; or
(b) at least 25 per cent of the total number of issued units of Forterra,
(collectively, the "Covenants")
the Swap Facility may be early terminated at the option of the swap counterparty upon seven (7) calendar days' prior written notice to Forterra.
Now, under the new TP loan covenant:
prior written consent of the Covenantees shall be obtained if Nan Fung International Holdings Limited, a holding company of the Trustee-Manager:
(a) ceases to be the controlling shareholder of the Trustee-Manager; or
(b) ceases to be the largest unitholder of Forterra;
My points are:
1) The bank loans are secured by legal mortgages over the group’s assets. LTV ratio covenant applies.
2) There was no “ownership covenant” requirement for TP loans before under the previous ownership/management – if there were, it would have been disclosed in compliance with rule 704(31).
3) But now there is - under the new ownership/management - Why? After all, which owner (previous or current) has a better credibility?
4) Maybe, the banks are more conservative this time - demanding added/more protections.
5) From the perspective of the banks, what added protection could the bank gain from covenant (b) given that (a) already exist ?
6) NF is the largest shareholders in FT now, with 30.79% stake.
7) Theoretically, its shareholdings could increase to 35% or drop to 27% and still remains as the largest shareholder.
8) Or, its shareholdings could change to 35% or 27%, with someone else being the largest shareholder.
9) Why not set (b) to be “NF must own not less than 30% of FT” ?
10) Would the lenders be “adequately protected” with different conditions of (b) under 7), 8) or 9) given that LTV & (a) are already in place? Bear in mind that both (a) & (b) were non- existence previously. The requirement for NF to be the largest shareholder does not add or increase the level of protection to the lenders beyond what (a) has already been providing, IMO.
11) Perhaps it is just another “coincidence”, perhaps it is just another “convenience” to have.
12) That said, I do agree with “G&F” that the banks would have no problems with a new “credible” major shareholder.
13) Also, I do agree with “PD” that non-compliance of the “ownership covenant” would trigger assets sales by the lenders.
14) “Intentionally” or “coincidence”, IMO, the way in which (b) is structured” serves to play a pre-emptive role in a sense that it would make it comparatively more difficult but not impossible for a potential aspiring major shareholder to raise its stake to a level above that of NF.
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