SINGAPORE - Pacific Star Development (PSD) is buying out its joint venture partner in the Puteri Cove Residences project to facilitate the obtaining of a $70 million loan facility, the property developer announced late on Monday (Dec 24).
PSD will face an outlay of $26 million to buy out Max Treasure Co, the partner in Twin Prosperity Group, which is in turn the holding company of the Puteri Cove project in Malaysia. The two-part transaction will involve Twin Prosperity buying back and cancelling Max Treasure's 49 per cent Twin Prosperity stake for $11 million, and Twin Prosperity repaying a $15 million loan from Max Treasure.
After the transaction, PSD will be the sole shareholder of Twin Prosperity. PSD said that being the sole owner of Puteri Cove is a requirement under a new $70 million two-year secured loan facility that will fund PSD's working capital and a property development project in Bangkok called The Posh Twelve. The lenders of the loan facility are funds managed by OCP Asia (Singapore).
The loan facility bears an annual cash coupon of 7.5 per cent payable quarterly and a payment-in-kind interest of 5 per cent that is capitalised to the outstanding amount. The lenders will also receive $3.5 million and 12.5 per cent of distributions from Puteri Cove to PSD under a profit-sharing agreement.
The loan is secured by assets held by PSD, including share charges and debentures related to the Puteri Cove project.
PSD said that the loan will be used to pay for transaction costs of the loan and the share repurchase deal, repay debt, fund The Posh Twelve and for working capital.
If the drawdown of the loan and the share repurchase transaction had been completed on June 30, 2018, PSD's net tangible asset per share as at June 30 would have been 7.77 cents instead of the reported 4.55 cents. The group's net debt would have been 3.70 times total equity as at end-June, instead of the reported gearing ratio of 5.73 times.