SCA Jump Early to Strengthen Balance Sheet6 April 2020
SCA Property Group have jumped early to strengthen its balance sheet with a $300m equity raising.
The proceeds from the equity raising will be used to strengthen SCP’s balance sheet and provide funding flexibility to continue to deliver its strategy of investing in convenience based supermarket-anchored centres as opportunities arise. The equity raising includes a fully underwritten institutional placement of $250 million and a non-underwritten Unit Purchase Plan to raise $50 million.
Units will be issued under the Placement at a price of $2.16 per unit, representing an 8.5% discount to the closing price of $2.36 on 6 April 2020
SCA were careful to advise that whilst there is uncertainty in relation to the duration and economic impact of the COVID-19 pandemic, its supermarket-anchored centres are resilient, the numerous Government stimulus packages will assist small business tenants and their customers and the equity raising will reduce its gearing to 24.0% providing the Trust with greater capacity to withstand any unexpected downside scenarios.
SCA previously advised the market, that a number of its tenants have been required to close for an indefinite period including gyms, cinemas, massage, beauty, tanning salons and nail bars. Those tenants represent approximately $1.0 million per month of the groups gross rental income. In addition, cafes and restaurants (which are still able to offer takeaway services) represent approximately $0.7 million per month of the groups gross rental income. As such the gross rental income from all tenants in the affected categories is approximately 0.6% of our annual gross property income, per month.
The group also advised that no abatements have been agreed as yet, and that they are considering requests on a case-by-case basis once March sales figures were made available, with adjustments able to take several forms including rental deferrals or abatements. SCA expects that any short term impacts to income will be partially offset by percentage rental gains from major stores.
In raising additional equity, SCA are also positioning themselves to secure quality assets at competitive prices over the next 6-12 months. Following the equity raising, the group will have over $550 million in cash and undrawn facilities to act quickly as earnings accretive opportunities arise.
Since 31 December 2019, SCP has entered into $100 million of new bilateral debt facilities taking the total revolving bilateral facilities to $400 million. Adjusting for these new facilities and other post 31 December 2019 events (including the sale of Cowes and proceeds from the underwritten distribution paid in January 2020), SCP has cash and undrawn debt facilities of $277 million prior to the equity raise.
Post the two new bilateral debt facilities and repayment of debt using $132 million from the proceeds of the equity raise, it is anticipated that SCP’s weighted average debt maturity will be 5.2 years and weighted average cost of debt will increase to 3.6% due to line fees on undrawn debt facilities.