today's afr article

An article in today's AFR says that IIF has only managed to gain minimal support from investors after refinancing $1.63BN in debt and making itself a more attractive takeover target for substantial shareholder Goodman Group.

The big drag on investor interest in IIF is the costly refinancing. IIF's lenders have restricted the fund from starting any new developments or making any new acquisitions until its gearing drops below 45%. Gearing is now 69.3%. Distributions will not be paid until gearing reaches the same level. In addition to these things a 3.5% premium on the cost of debt will only drop back to 3% once gearing falls below 50%.

A JP Morgan analyst is quoted in the article as saying that the only way IIF can ever be looked upon favourably is if it raises capital and restores distributions. The analyst further stated that the only way for IIF to grow by acquisition and development and pay distributions is to raise capital.

The analyst raised the spectre of a further twelve months without distributions, $400MN in further asset sales and a $520MN capital raising.

A Merrill Lynch analyst expects a bigger capital raising of $610MN and states that this would dilute IIF's NAV by 27%. The analyst was also quoted as saying that IIF wasn't out of the woods yet despite the refinancing agreement being reached.