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Cityspring Infrastructure Trust
30-11-2010, 06:23 PM. (This post was last modified: 30-11-2010, 06:43 PM by Musicwhiz.)
Post: #1
Cityspring Infrastructure Trust
This business trust was considered to be an extremely stable and defensive business trust with decent dividend payouts. But it seems its debt has caught up with it ? Or has it ?

Kim Eng has written a bearish report about Cityspring titled 'At the mercy of credit rating agencies'.

http://www.remisiers.org/cms_images/city...2010ke.pdf

It will be interesting to see what will happen in the coming quarters.

(Not Vested in Cityspring nor in any infrastructure business trust)
=========== Signature ===========
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.

Find
30-11-2010, 09:11 PM.
Post: #2
RE: Cityspring Infrastructure Trust
I don't think S&P is doing the wrong thing here, bearing in mind that (1) S&P is now a more responsible rating agency; and (2) presumably most of the holders of Basslink's total AUD676.0m bonds (in 2 issues, due Aug2015 and Aug2017, respectively) are big and small Australian institutions, which are more accustomed to relying on a good credit rating for their lending/investing decisions. I also believe credit should be given to the analyst from Kim Eng for highlighting this case and for his 'SELL' call.

Cityspring unitholders who have been happily taking in their quarterly DPUs should really sit up and take a good look at the latest (30Sep10) B/S, both at the group and trust levels.....
http://info.sgx.com/webcoranncatth.nsf/V...penelement

At the group level, as at 30Sep10, Cityspring had total gross debts of $1,531.6m, and cash and bank deposits totalling $150.3m, giving a net debt position of $1,381.3m - against a total unitholders' funds balance of only $346.39m.

At the trust level, as at 30Sep10, there was an outstanding $141.4m corporate loan (due in Aug2011), and cash and bank deposits totalling $51.1m, giving a net debt position of $90.3m - against a total unitholders' funds balance of $603.6m.

Quite clearly, the present high gearing at group level is quite untenable, especially if we take a longer term view.

Since its IPO - priced at $0.89 - in Feb2007, Cityspring already had in Sep09 a massive 1-for-1 rights issue at $0.48, raising $227.5m (nett) which was applied solely to repay debts.

A quick look at the historical price chart (till 5Jul10 only) since IPO will confirm Cityspring as a menace, destroying quite a lot of shareholders' value already.....
http://finance.yahoo.com/echarts?s=A7RU....=undefined

I think it is also important to note that since the capital raising via the rights issue in Sep09, Cityspring's price has remained range-bound at the average $0.60 level - i.e. the counter has not paced the overall market advance in the past 18 months.

If Cityspring's bondholders want out, would Temasek come forward?

Lessons to be learned - In investing, just can't push to use gearing or financial engineering all the way. For investors, it is obviously not safe enough just blindly go for big size, reputable sponsor, regular dividends, and good dividend yield.

Find
30-11-2010, 10:34 PM.
Post: #3
RE: Cityspring Infrastructure Trust
I noted that Citispring is highly-geared too and went onto their website under "investor relations" just to have a look see. Part of what I found is copied and pasted below.

What I now don't know is , does Citispring's justification of its high debt levels make sense? , i.e. is it really correct that high debt levels are ok for their operations (due to stable and long-term contracted cashflows from customers), or is it a case of the barber being the worst person to ask whether you need a haircut?


"Debt and Gearing
At CitySpring, all of our operating units utilises non-recourse financing that are specifically structured to match the stable and long-term contracted cashflows from its customers. Generally, our philosophy towards our overall debt structure is to ensure that all of our businesses must have sufficient financial flexibility to meet their capital expenditure and operational needs, and at the same time, service their debt obligations promptly and reliably. This ensures that our capital structure remains optimal in providing us with the flexibility to execute our growth strategies.
As such, our consolidated debt-to-equity ratio at the CitySpring level is not a relevant measure of our indebtedness."



Find
01-12-2010, 12:53 AM.
Post: #4
RE: Cityspring Infrastructure Trust
I collected the past 5 quarter worth of NAV data from Cityspring and it seems to be pretty volatile.

Unit-holder's Equity
2Q 2010: $435.4 million
3Q 2010: $603.4 million
4Q 2010: $428.7 million
1Q 2011: $355.1 million
2Q 2011: $346.9 million

Over the past 12 months, NAV has been declining. I am not too sure why it is declining at such a rapid pace considering its losses aren't large enough to wipe out $250 million in the space of 12 month ?

If there is some other factor that is pressing down its NAV, perhaps the NAV may not be a good gauge on the company's health ? I think Cityspring mentioned that equity isn't an accurate way to measure its financial health ?

Thanks for comments.

(Not Vested)
=========== Signature ===========
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.

Find
30-06-2011, 03:43 PM.
Post: #5
RE: Cityspring Infrastructure Trust
Shares were halted today. Could be equity fund raising ?
=========== Signature ===========
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.

Find
30-06-2011, 06:36 PM.
Post: #6
RE: Cityspring Infrastructure Trust
I am afraid the inevitable has finally happened - again! - as Cityspring is calling for more capital, structured as a 11-for-20 rights issue priced at $0.39 per new share.....
http://info.sgx.com/webcoranncatth.nsf/V...penelement

The real effect of this is that Cityspring is now asking its unitholders to cough out all the dividends they have received to-date, and also their guts! How to invest like that!?

Investors should learn from the track record and behaviour of Cityspring and other business/property asset trusts, and be really wary of financially engineered investment instruments.

Find
30-06-2011, 09:09 PM.
Post: #7
RE: Cityspring Infrastructure Trust
dydx Wrote:The real effect of this is that Cityspring is now asking its unitholders to cough out all the dividends they have received to-date, and also their guts! How to invest like that!?

So don't invest. Capital markets are efficient that way - over time they result in the transfer of wealth from the financially illiterate to the financially astute. That's the way the real world works, too.

Cityspring has been behaving like Rickmers Maritime Trust and First Ship Lease Trust, paying out cash without keeping enough aside for debt repayment and asset renewal. It is hardly surprising that it had to do a rights issue during the crisis in Aug 2009. It is utterly shameful that it has to do so again. Evidently the Trustee-Manager is not doing its job properly, since its decisions have resulted in 2 rights issues which have consumed all the cash ever paid out and more.

As usual, YMMV.

Find
30-06-2011, 09:50 PM. (This post was last modified: 30-06-2011, 09:51 PM by Nick.)
Post: #8
RE: Cityspring Infrastructure Trust
Current Yield: 4.2 / 53.5 = 7.85%

New Yield: 3.28 / 48.35 = 6.78% (based on Management pro forma statement which assumes debt repayment)

Clearly yield destroying and if investors demand the same yield as before, there might be capital losses as well since XR price will be adjusted downwards. A business trust is meant to be a flexible system which allows the regular payout of distributions. There is no need to payout as much cash as possible - instead the Trust should retain cash for debt repayment in order to repay its loans independently. Equity market should be tapped for growth only. At the moment, it would seem that only the 3 shipping trust have a loan repayment plan of which 2 were forced to do so by its lenders during the credit crunch.

(Not Vested in any Trust)
=========== Signature ===========
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.

Find
01-07-2011, 07:26 AM.
Post: #9
RE: Cityspring Infrastructure Trust
Business Times - 01 Jul 2011

CitySpring trust unveils $210m rights issue


By FELDA CHAY

CITYSPRING Infrastructure Trust is looking to raise $210.2 million through a renounceable rights issue to strengthen its balance sheet.

The trust, partly owned by Temasek Holdings, will issue about 539 million new units at a price of 39 cents per rights unit. The issue will be offered to unitholders on the basis of 11 rights units for every 20 units held, said its trustee-manager CitySpring Infrastructure Management yesterday.

Temasek, which owns 28 per cent of CitySpring, has irrevocably undertaken to subscribe for 85 per cent of all the rights units. The existing directors of the trustee-manager also intend to take up their entitlements under the rights issue in full, said CitySpring.

The rights issue is at a 27.1 per cent discount to CitySpring's last transacted price of 53.5 cents per unit before a trading halt was imposed for the second half of the day yesterday.

Net proceeds from the issue, expected to be $204.8 million, will be used to reduce CitySpring's net gearing, and give it the flexibility to pre-pay or refinance bonds that it previously issued to finance its acquisition of Australian undersea electricity transmission cable Basslink.

Funds could also be used for CitySpring's general corporate purposes.

'The rights issue will strengthen the group's balance sheet and give it greater flexibility to reduce its gearing, whether at Bass-link or CitySpring level.

'The trustee-manager is confident that following the rights issue, the negative outlook on the bonds' rating can be removed, thereby ensuring that Basslink is not precluded from continuing to make distributions to CitySpring,' it said.

Standard & Poor's has a BBB- rating on the Basslink bonds and a negative outlook on them, citing Basslink's vulnerability to refinance the bonds at a higher interest cost in 2015. When the bonds were issued, it was stated that if their rating falls to BB+/Ba1 or lower, Basslink will not have to make distributions to CitySpring.

Basslink generated cash earnings of A$10.8 million ($14.2 million) for the three months ended March 31, 2010, up 83.1 per cent from the same period a year ago. This helped to lift CitySpring's cash earnings for the quarter, during which the trust upped its cash earnings by 7.4 per cent to $23.5 million for the fiscal fourth quarter.

Over the last three financial years, Basslink has distributed an average of A$4.7 million per quarter to CitySpring.
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My Value Investing Blog: http://sgmusicwhiz.blogspot.com/

http://sgmusicwhiz.blogspot.com
Website Find
01-07-2011, 10:32 AM.
Post: #10
RE: Cityspring Infrastructure Trust
(30-06-2011, 09:09 PM)d.o.g. Wrote:
dydx Wrote:The real effect of this is that Cityspring is now asking its unitholders to cough out all the dividends they have received to-date, and also their guts! How to invest like that!?

So don't invest. Capital markets are efficient that way - over time they result in the transfer of wealth from the financially illiterate to the financially astute. That's the way the real world works, too.

Cityspring has been behaving like Rickmers Maritime Trust and First Ship Lease Trust, paying out cash without keeping enough aside for debt repayment and asset renewal. It is hardly surprising that it had to do a rights issue during the crisis in Aug 2009. It is utterly shameful that it has to do so again. Evidently the Trustee-Manager is not doing its job properly, since its decisions have resulted in 2 rights issues which have consumed all the cash ever paid out and more.

As usual, YMMV.

Incredibly inept management. Divested with slight loss excluding dividends collected.

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