I received this direct from Mac Capital Funds yesterday and it provides some additional reassurance that they’ll get it right over time. Although not specifically covered it’s also interesting to note the positive impact of appreciation AUD and down the track reinflating interest rates will have on on REITs derivate net liability positions. Add to this the Dow & FTSE100 technically broking out and likley to test 8000 (possible bear rally upside 9000) and 4300 respectively.
"Currently the trust is working proactively towards selective asset sales in efforts to reduce our gearing and to strengthen our balance sheet. As at December 31 we had completed A$127.1m in sales for the first half of the financial year and our gearing was at 58.8% (Debt:Total assets). Portfolio revaluations were down 10% which resulted in an increase in gearing of 5.6%.
Further sales of 15 US properties are currently under due diligence and upon completion of these sales gearing will reduce to approximately 56.3%, while at the same time meeting the objective of rebalancing the portfolio's geographic weighting towards Australian assets. These sales are a significant achievement for the trust in difficult market conditions.
During 1HFY09 we have also repaid A$69m of debt. Our debt maturities and funding remain well diversified.
The trust is compliant with all covenants and has recently made some major achievements in regards to capital management. These include an extension of the head trust multi currency facility to February 2012 and an easing of the associated net worth covenant to A$1.5billion (previously A$1.8billion), a significant buffer exists with net assets at A$2.1billion. For the same facility our interest coverage is at 2.99 times while the covenants is 1.75x. Please also note that part of this facility is un drawn (A$58.1m).
The gearing covenant for the ISDA facility you are referring to is 70% with the actual level at 60.8%, there is substantial head room for this covenant.
Fundamentally the trust remains in a sound position with total portfolio occupancy at 96.3% with more than 430 leasing transactions completed in the 6 months to December 31.
While market conditions continue to be challenging, management is focused on debt reduction through asset sales and maintaining strong occupancy levels throughout a portfolio of high quality assets. We hope the above initiatives give investors such as yourself, a greater level of comfort in the Trust's ability to meet its debt obligations."
MCW Price at posting:
24.0¢ Sentiment: Buy Disclosure: Held
