I believe this is the article that DW first brought up. Enjoy~
S-Reits banking more on MTNs for financing
Oxley Holdings is latest with $135m fixed-rate notes maturing in 2015
By Mindy Tan
[email protected]
S-REITS have become less reliant on traditional senior loans secured against specific assets, and are taking to using Medium-Term Note (MTN) issuances as an alternative source for the financing of their real estate portfolios.
Indeed, there has been a significant rise in MTN issuances in the past five years.
Jones Lang LaSalle's (JLL) Asia Capital Markets research team has said that MTNs in issue grew at a compounded annual growth rate of 38 per cent between 2008 and 2012. These issued bonds, often guaranteed by the S-Reit's Trustee rather than secured against a specific asset or portfolio of assets, now represent about 30 per cent of total borrowing among S-Reits which issue MTNs.
To date, approximately half the Reits listed on Singapore Exchange have MTN facilities in place; they include CapitaMall Trust, Ascendas Reit, Frasers Centrepoint Trust and Cambridge Industrial Trust, said the consultancy.
Yesterday, Oxley Holdings announced that it had issued $135 million in fixed-rate notes due in 2015 under its $500 million multi-currency MTN programme.
The Series 3 Notes will bear interest at the fixed rate of 4.75 per cent per annum, and mature on Sept 23, 2015.
The net proceeds will be used for general corporate purposes, including the refinancing of existing borrowings and the financing of working capital and capital-expenditure requirements.
MTNs are increasingly popular partly because they can be offered under varying structures, such as multi-currency, maturity, fixed/floating coupon and listing/unlisted for each tranche issued.
Another trend of note is that although MTN issuances have been steadily increasing, the gearing of most S-Reits has remained relatively stable.
Indeed, the higher proportion of unsecured MTNs of total debt, coupled with a prudent leverage ratio, have helped support a higher unencumbered-asset ratio for their portfolios, which makes for favourable credit ratings.
In addition, MTNs are an alternative source of debt that managers have at their disposal, and a disciplined approach to growing Reits' asset base, said JLL.
Bastian van Halder, the associate director of JLL's corporate finance team, said: "The popularity of MTNs as an alternative source of finance for S-Reits would probably continue in the medium term, given their current strategy to increase assets under management while adopting a more flexible debt management strategy."
Specifically, S-Reits are likely to continue to issue debt within the two-year to five-year maturity range, said JLL.
This is because the spread between 10-year Singapore Government Securities (SGS) bonds and five-year SGS bonds widened to 134 basis points in Q2, from 100 basis points as at the end of Q1 this year, marking the largest quarter-on-quarter spike since 2009.
By issuing debts around the two-year to five-year maturity range, S-Reits will be better able to manage the portfolio's weighted average cost of debt and targeted weighted average debt expiry profile, said JLL.
To this end, MTN programmes and their subsequent series of unsecured notes issuances are likely to continue to be used by managers to finance acquisitions or to refinance maturing debt, added the consultancy.
Source: Business Times
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