Frasers Hospitality Trust to raise $266m in rights issue

Frasers Hospitality Trust says proceeds from its rights issue will be used mainly for purchasing its first hotel in Melbourne, the Novotel Melbourne on Collins (above and below), for A$237 million (S$245 million). The 380-room hotel has "undergone va
Frasers Hospitality Trust says proceeds from its rights issue will be used mainly for purchasing its first hotel in Melbourne, the Novotel Melbourne on Collins (above), for A$237 million (S$245 million). The 380-room hotel has "undergone various asset-enhancement initiatives in recent years".PHOTO: FRASERS HOSPITALITY TRUST
Frasers Hospitality Trust says proceeds from its rights issue will be used mainly for purchasing its first hotel in Melbourne, the Novotel Melbourne on Collins (above and below), for A$237 million (S$245 million). The 380-room hotel has "undergone va
Frasers Hospitality Trust says proceeds from its rights issue will be used mainly for purchasing its first hotel in Melbourne, the Novotel Melbourne on Collins (above), for A$237 million (S$245 million). The 380-room hotel has "undergone various asset-enhancement initiatives in recent years".PHOTO: FRASERS HOSPITALITY TRUST

Frasers Hospitality Trust (FHT) plans to sell new units to existing unit holders to raise S$266.3 million in gross proceeds.

The rights issue funds will be used mainly for FHT's purchase of its first hotel in Melbourne, the Novotel Melbourne on Collins, for A$237 million (S$245 million).

The issue would also reduce FHT's debt levels and strengthen its balance sheet, it said yesterday.

"(The acquisition) will enhance income diversification of (the trust) and mitigate distribution per stapled security yield dilution arising from the rights issue," Ms Eu Chin Fen, chief executive of the Reit manager, said in a statement.

FHT is offering about 441.55 million new stapled securities in the trust at 60.3 cents per rights stapled security.

Eligible stapled security holders will be offered the rights stapled securities on the basis of 32 rights stapled securities for every 100 existing stapled securities.

The rights issue offers these holders the chance to subscribe for their pro rata entitlement at the issue price which represents a discount of about 23.7 per cent to FHT's closing price of 79 cents per stapled security yesterday, FHT said.

With the rights issue, FHT expects gearing to fall from 38.3 per cent to 34.1 per cent, while free float will rise from $431.2 million to $536.5 million.

The trust's sponsor, Frasers Centrepoint, and strategic investor TCC Group Investments, will subscribe for up to 69.7 per cent of the stapled securities to be issued under the rights issue.

The 380-room Novotel Melbourne on Collins is and will continue to be operated by AccorHotels Group.

"Having undergone various asset-enhancement initiatives in recent years, the hotel has potential to capture higher-yielding business with no major capital expenditure foreseeable in the near term," the trust's manager said.

Following the acquisition, FHT's portfolio will stand at 15 properties, with portfolio size rising from $2.1 billion to $2.3 billion on a pro forma basis. The hotel is FHT's fourth in Australia.

Eligible stapled security holders can subscribe to their rights entitlement from Sept 23 to Oct 7. Those who do not wish to subscribe may sell their "nil-paid" rights from Sept 23 to Oct 3, to crystallise the value of the rights discount.

The rights stapled securities are expected to be listed on the Singapore Exchange on Oct 17.

A version of this article appeared in the print edition of The Straits Times on September 10, 2016, with the headline 'Frasers Hospitality Trust to raise $266m in rights issue'. Print Edition | Subscribe