19/05/2009 - 14:41

Aspen reveals $82m underwritten raising

19/05/2009 - 14:41

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Property developer Aspen Group has unveiled plans for a fully underwritten capital raising of more than $82 million, which will be used to "secure an enhanced senior debt facility".

Aspen reveals $82m underwritten raising

Property developer Aspen Group has unveiled plans for a fully underwritten capital raising of more than $82 million, which will be used to "secure an enhanced senior debt facility".

The one-for-1.1 entitlement offer will take place in two parts with the institutional component to raise at least $40 million and the retail component to raise up to $42.4 million.

Shares will be priced at 30 cents each. Aspen shares last traded at 35.5c before entering into a trading halt yesterday.

The offer is underwritten by Euroz Securities.

Aspen said it had secured enhanced senior debt facility terms with existing financier, National Australia Bank, subject to the property developer raising a minimum of $50 million.

 

 

The announcement is below:

 


Aspen Group has today announced a fully underwritten equity raising of $82.4 million at an offer price of $0.30 per security. Proceeds from the equity raising will strengthen the Group's balance sheet through application of funds to reduce debt, providing substantial headroom within the Group's senior debt facility.

The equity raising will be undertaken via an accelerated non-renounceable 1 for 1.1 pro rata offer ("Entitlement Offer") at $0.30 per security to eligible securityholders. The Entitlement Offer comprises an institutional component ("Institutional Offer") of at least $40.0 million and a retail component ("Retail Offer") of no more than $42.4 million.

The Entitlement Offer is fully underwritten by Euroz Securities Limited.

The equity raising provides the following key benefits to the Group:

The ability to secure an enhanced senior debt facility with our primary lender (details provided within)

Senior debt facility drawn to 48%¹ LVR resulting in significant headroom capacity (revised covenant LVR of 65%)

Creates liquidity to take advantage of market opportunities

Reduces gearing from 39% to 27%²

Strengthens annualised interest cover to 4.3 times³

Aspen Group Managing Director Angelo Del Borrello said the capital raising is a further step in the Group's recent capital management initiatives and significantly enhances the Group's financial strength.

"The substantial reduction in debt levels, coupled with the Board's decision earlier in the year to undertake a full independent review of asset values as at 31 December 2008, provides greater confidence in our current financial position", said Mr Del Borrello.

Aspen retains a sound business model comprising core income producing properties and innovative funds management products. The Board believes that in the face of the continuing difficult economic and financial climate, it is important to consolidate Aspen's position by reducing gearing below the Group's previously stated target gearing range of 30%-40%.

"Reducing the Group's gearing level below the target range will create a comfortable level of headroom within the senior debt facility and enable the Group to selectively and prudently review high value growth opportunities expected to arise in the next 12 months," said Mr Del Borrello.

Enhanced Senior Debt Facility

Stemming from this equity raising, the Group has secured enhanced senior debt facility terms with its existing primary financier, National Australia Bank. The new facility provides for significantly more headroom and further LVR flexibility.

Key highlights of the revised facility are described below:

A minimum LVR covenant of 60% for the life of the facility with capacity to increase to 65% if further valuation softening occurs

Removal of the LVR step down to 55% (previously required in January 2011)

Generally more flexible facility agreement terms

The term of the facility remains unchanged (maturity date of 28 February 2012). The revised senior debt terms are subject to raising minimum cash proceeds of $50 million by 30 June 2009 which is expected to be achieved given the Entitlement Offer is fully underwritten. The underwriting agreement is subject to usual termination events.

Earnings4 and Distributions Guidance

Aspen's earnings guidance for the financial year ending 30 June 2009 (excluding the impact of the Entitlement Offer) remains 12.50 cps to 14.20 cps on a pre-issue basis which is consistent with the range previously provided to the market. On a post issue basis this equates to a range of 11.65 cps to 13.21 cps for the 2009 financial year.

On an annualised basis, incorporating both the dilution of new securities and interest savings for a full year, this would equate to an underlying earnings range of 6.77 cps to 7.58 cps. This level of earnings per security is expected to be maintainable for the 2010 financial year.

New securities issued under the Entitlement Offer will rank equally with existing securities and will be entitled to the June quarter distribution. The estimated distribution for the June quarter is 1.04 cps, equivalent to the previously announced 2.04 cps on a post Entitlement Offer basis.

The Group's distribution policy is to pay out 70%-80% of underlying earnings. The outlook for 2010 (on the above mentioned basis) is for an annualised distribution level range of 4.74 cps to 5.31 cps based on a 70% payout ratio.


Summary

Aspen Group is undertaking this equity raising as part of its ongoing capital management strategy. The decision to proceed with an Entitlement Offer provides all securityholders with an opportunity to increase their holding at an attractive entry price of $0.30 per security, a significant discount to the post Entitlement Offer net tangible asset backing of $0.74 per security.

The successful completion of this equity raising will ensure the Group is well positioned to execute its proven business model and capitalise on attractive opportunities going forward. 4 Earnings exclude revaluation and fair value adjustments

Entitlement Offer

Under the Entitlement Offer securityholders are invited to participate in a non-renounceable prorata entitlement of 1 security for every 1.1 securities held at an offer price of $0.30 per security. The record date for entitlements is 5pm WST Friday 22 May 2009.

The Entitlement Offer comprises an institutional component of at least $40.0 million and an offer of no more than $42.4 million to eligible retail securityholders to participate at the same price. The Entitlement Offer is fully underwritten by Euroz Securities Limited.

The Institutional Offer is expected to be finalised by 12 pm WST on Wednesday 20 May 2009. Aspen Group expects to announce the outcome of the Institutional Offer to the market prior to the start of trading on Thursday 21 May 2009, with trading expected to resume at commencement of trading on the ASX on that day.

If the Institutional Offer is not fully subscribed to, institutional securityholders will have an opportunity to apply for additional securities in excess of their entitlement. Any remaining securities not taken up will be offered for subscription to eligible institutional holders and selected institutions at the Entitlement Offer price of $0.30 per security.

The Retail Offer opens on 27 May 2009 and will be undertaken by way of a Retail Entitlement Offer booklet which is expected to be mailed to securityholders on 27 May 2009. If the Retail Offer is not fully subscribed to, retail securityholders will have an opportunity to apply for additional securities in excess of their entitlement.

Securityholders who do not take up their entitlements in full or in part will not receive any value in respect of those entitlements that they do not take up.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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