OUE Commercial REIT (OUE C-REIT) has, through its wholly-owned subsidiary, OUE CT Treasury, issued $100 million worth of fixed rate notes with a 4.20% coupon. The five-year notes will be due in 2027 and are payable semi-annually in arrears.
The notes come with a coupon step-down trigger upon the bonds’ re-rating to investment grade.
The rate of interest payable to noteholders will be reduced by 25 basis points to 3.95% when any credit rating agency assigns an investment grade rating to both the REIT and the notes within 18 months of its issuance.
This will be the first such bond issue in Singapore.
The notes have been issued under OUE C-REIT’s $2 billion multicurrency debt issuance programme. Proceeds of the notes will be used for the refinancing of existing borrowings, general corporate funding and working capital purposes.
OCBC Bank was appointed as the sole lead manager and bookrunner.
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According to the REIT, the bond issue was met with “strong demand” from investors, with the final order book closing at $250 million with orders across 30 accounts.
“Proactive capital management is one of the key pillars of the manager’s strategy and we are pleased to be executing on this landmark transaction which dovetails with our continued efforts to strengthen OUE C-REIT’s capital structure, widen the pool of funding sources and increase financial flexibility while keeping borrowing costs stable,” says Han Khim Siew, CEO of the manager.
“OUE C-REIT’s healthy capital management metrics and sound financial position stands us in good stead, we are confident of being assigned an investment grade rating for OUE C-REIT within the next 18 months. The proportion of fixed rate debt post the issuance will also increase to approximately 76.8% which will further mitigate the impact of rising interest rates on OUE C-REIT’s earnings,” he adds.
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Following the issuance of the bond, the REIT’s weighted average debt maturity is expected to lengthen from 3.0 years as at Dec 31, 2021, to 3.1 years on a pro forma basis.
Approximately 76.8% of total debt will be on a fixed rate basis which mitigates the impact of rising interest rates. The weighted average cost of debt is expected to remain largely stable at approximately 3.3% per annum.
Units in OUE C-REIT closed at 42 cents on May 5.
