| Fri 1 Oct 2010, 12:25 | | HPA/HPB - Hospitality Property Fund Limited - Rights offer declaration |
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HPA HPB
HPA
HPA/HPB - Hospitality Property Fund Limited - Rights offer declaration
announcement, financial effects and withdrawal of cautionary
Hospitality Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/014211/06)
Share code for A-linked units: HPA
ISIN for A-linked units: ZAE000076790
Share code for B-linked units: HPB
ISIN for B-linked units: ZAE000076808
("Hospitality" or "the company")
RIGHTS OFFER DECLARATION ANNOUNCEMENT, FINANCIAL EFFECTS AND WITHDRAWAL OF
CAUTIONARY
INTRODUCTION
Linked unitholders are referred to the announcements released on SENS on 18
August 2010 and 31 August 2010 in which it was announced that Hospitality would
undertake a rights offer ("the rights offer") in order to partially fund the
acquisition ("the transaction") of the Westin Grand Cape Town ("Westin") and
Arabella Western Cape Hotel and Spa ("AWCHS") (collectively, "the Arabella
hotels").
TERMS OF THE RIGHTS OFFER
In terms of the rights offer:
- Hospitality A-linked unitholders will be offered a total of 21 030 043
rights offer A-linked units at an issue price of R12.80 each in the ratio
of 31.0492 rights offer A-linked units for every 100 A-linked units held by
them on the record date for participation in the rights offer;
- Hospitality B-linked unitholders will be offered a total of 21 030 043
rights offer B-linked units at an issue price of R10.50 each in the ratio
of 31.0492 rights offer B-linked units for every 100 B-linked units held by
them on the record date for participation in the rights offer; and
- Hospitality linked unitholders will have the right to apply for any excess
rights offer linked units not taken up by other linked unitholders and any
such excess linked units will be attributed equitably based on the number
of linked units held by the linked unitholder concerned and the number of
excess linked units applied for, taking cognisance of the number of linked
units and rights held by the linked unitholder just prior to such
allocation, including those taken up as a result of the rights offer, and
the number of excess rights applied for by such linked unitholder.
FOREIGN LINKED UNITHOLDERS
Introduction
Foreign linked unitholders may be affected by the rights offer, having regard to
prevailing laws in their relevant jurisdictions. Such foreign linked
unitholders should inform themselves about and observe any applicable legal
requirements of such jurisdiction in relation to all aspects of the rights offer
that may affect them and should refer to the rights offer circular for details
of the rights offer and the laws and regulations governing the rights offer.
Any Hospitality linked unitholder who is in doubt as to his position with
respect to the rights offer in any jurisdiction should consult an appropriate
independent professional adviser in the relevant jurisdiction without delay.
Note to U.S. linked unitholders
The rights offer linked units will not be registered with the U.S. Securities
and Exchange Commission ("SEC") under the U.S. Securities Act of 1933, as
amended, or any U.S. state securities laws.
Hospitality linked unitholders who are citizens or residents of the U.S. are
advised that the rights offer linked units have not been and will not be
registered under the U.S. Securities Exchange Act of 1934, as amended.
SALIENT DATES AND TIMES OF THE RIGHTS OFFER
Subject to the registration of the rights offer circular, forms of instruction
and other documents with the Companies and Intellectual Property Registration
Office, as required by Section 146A of the Companies Act (Act 61 of 1973) by
11h00 on 8 October 2010, the salient dates of the rights offer will be as
follows:
2010
Last day to trade in Hospitality linked units in Friday, 15 October
order to participate in the rights offer on
Listing and trading of letters of allocation on Monday, 18 October
the JSE on
Hospitality linked units commence trading on the Monday, 18 October
JSE ex-rights offer entitlement on
Record date for determination of linked Friday, 22 October
unitholders entitled to participate in the rights
offer (initial record date) on
Rights offer opens at 12:00 on Monday, 25 October
Rights offer circular and forms of instruction Monday, 25 October
posted to linked unitholders, where applicable, on
Dematerialised linked unitholders will have their Monday, 25 October
accounts at their CSDP or broker automatically
credited with their entitlement on
Certificated linked unitholders on the register Monday, 25 October
will have their entitlement credited to an account
held with the transfer secretaries on
Last day to trade letters of allocation on the JSE Friday, 5 November
on
Maximum number of rights offer linked units listed Monday, 8 November
and trading therein commences on the JSE on
Rights offer closes at 12:00 on (see note 1) Friday, 12 November
Record date for letters of allocation (final Friday, 12 November
record date) on
Rights offer linked units issued on Monday, 15 November
Dematerialised unitholders accounts updated and Monday, 15 November
debited by CSDP or broker with rights offer linked
units on
Results of rights offer announced on SENS on Monday, 15 November
Results of rights offer announced in the press on Tuesday, 16 November
Refunds (if any) to certificated linked Wednesday, 17 November
unitholders in respect of unsuccessful excess
applications made and/or linked unit certificates
posted on or about
Dematerialised unitholders accounts updated and Wednesday, 17 November
debited by CSDP or broker in respect of any excess
linked units allocated on
Notes:
1 Dematerialised linked unitholders are required to inform their CSDP or
broker of their instructions in terms of the rights offer in the
manner and time stipulated in the agreement governing the relationship
between the unitholder and its CSDP or broker.
2 Linked unit certificates may not be dematerialised or rematerialised
between Monday, 18 October 2010 and Friday, 22 October 2010, both days
inclusive.
3 Dematerialised linked unitholders will have their accounts at their
CSDP or broker automatically credited with their rights and
certificated linked unitholders will have their rights credited to a
nominee account at Computershare.
4 CSDPs effect payment in respect of dematerialised linked unitholders
on a delivery-versus-payment method.
5 The dates above are subject to change. Any changes will be released on
SENS.
FINANCIAL EFFECTS OF THE RIGHTS OFFER AND THE TRANSACTION
The table below sets out the unaudited pro forma financial effects of the rights
offer and the transaction based on Hospitality`s audited results for the year
ended 30 June 2010. These financial effects are the responsibility of the
directors of Hospitality and they have been prepared for illustrative purposes
only, in order to provide information about the results and financial position
of Hospitality assuming that the rights offer had been implemented on 1 July
2009 for purposes of the statement of comprehensive income, and that the rights
offer and the transaction had been implemented on 30 June 2010 for purposes of
the statement of financial position.
The unaudited pro forma consolidated statement of comprehensive income for the
year ended 30 June 2010 and the unaudited pro forma consolidated statement of
financial position of the Hospitality group at 30 June 2010 and the explanatory
notes thereto will be provided in the rights offer circular to Hospitality
linked unitholders.
Due to its nature, the unaudited pro forma financial information may not fairly
present Hospitality`s financial position, changes in equity, results of
operations and cash flows subsequent to the rights offer and the transaction.
The unaudited pro forma financial information has been reported on by the
independent reporting accountants.
The unaudited pro forma financial information has been prepared in accordance
with the accounting policies of the Hospitality group that were used in the
preparation of the audited consolidated financial statements for the year ended
30 June 2010.
The unaudited pro forma statement of financial position has been presented on
the basis that:
* in respect of the "After the rights offer and before the transaction"
column the transaction will not be successfully concluded and the
proceeds raised from the rights offer are assumed to be used to repay
a portion of the interest-bearing liabilities and the balance is
invested in cash and cash equivalents; and
* in respect of the "After the rights offer and after the transaction"
column the transaction will be successfully concluded and the proceeds
raised from the rights offer are assumed to be used to partially fund
the transaction.
The unaudited pro forma statement of comprehensive income has only been
presented on the basis that in respect of the "After the rights offer and before
the transaction" column the transaction will not be successfully concluded and
the proceeds raised from the rights offer are assumed to be used to repay a
portion of the interest-bearing liabilities and the balance is invested in cash
and cash equivalents. As forecast financial information for the Arabella hotels
have been prepared and presented below, an unaudited pro forma statement of
comprehensive income has not been presented for the assumption that the
transaction is successfully concluded and the proceeds raised from the rights
offer are assumed to be used to partially fund the transaction.
The table below reflects the unaudited pro forma financial effects of the rights
offer and the transaction on a Hospitality linked unitholder:
Before the After the Change After the Change
rights rights after rights after
offer and offer and the offer and the
before the before the rights after the rights
transactio transaction offer transaction offer
n1 and and
before after
the the
transact transa
ion (%) ction
(%)
Distribution per 116.30 116.30 0.0% N/A N/A
linked unit 87.98 78.32 (11.0)% N/A N/A
(cents)
- A-linked units
- B-linked units
Loss per linked (90.83) (47.10) 48.1% N/A N/A
unit (cents) (90.83) (47.10) 48.1% N/A N/A
- A-linked units
- B-linked units
Headline earnings 55.30 62.23 12.5% N/A N/A
per linked unit 55.30 62.23 12.5% N/A N/A
(cents)
- A-linked units
- B-linked units
Loss and diluted (193.06) (144.44) N/A N/A
loss per share 25.2%
(cents)
Net asset value 14.00 13.24 14.38
per linked unit 14.00 13.24 (5.4)% 14.38 8.6%
(including (5.4)% 8.6%
deferred
taxation)(Rands)
- A-linked units
- B-linked units
Net asset value 15.35 14.25 15.40
per linked unit 15.35 14.25 (7.2)% 15.40 8.0%
(excluding (7.2)% 8.0%
deferred
taxation)(Rands)
- A-linked units
- B-linked units
Net tangible 12.79 12.33 13.47
asset value per 12.79 12.33 (3.6)% 13.47 9.2%
linked (3.6)% 9.2%
unit(Rands)
- A-linked units
- B-linked units
Weighted average 62 474 525 83 504 568 33.7% N/A N/A
number of linked 62 474 525 83 504 568 33.7% N/A N/A
units in issue
- A-linked units
- B-linked units
Linked units in 63 112 101 84 142 144 33.3% 84 142 144 0%
issue at 30 June 63 112 101 84 142 144 33.3% 84 142 144 0%
2010
- A-linked units
- B-linked units
Notes and assumptions:
1 The figures set out in the "Before the rights offer and before the
transaction" column above have been extracted from the audited
financial statements of the group for the year ended 30 June 2010.
2 The rights offer and transaction is assumed to have been implemented
on 1 July 2009 for earnings, headline earnings and distributions per
linked unit purposes and on 30 June 2010 for net asset value and net
tangible asset value per linked unit purposes.
3 21 030 043 rights offer A-linked units and 21 030 043 rights offer B-
linked units are assumed to be issued at R12.80 and R10.50,
respectively, pursuant to the rights offer thereby raising capital of
R490 million.
4 The costs of the rights offer are assumed to be approximately R11.6
million.
The following notes and assumptions are applicable in respect of the "After the
rights offer and before the transaction" column:
5 It has been assumed that a portion of the net proceeds of the rights
offer (after payment of estimated costs of R11.6 million) will be
utilised to repay the floating portion of the interest-bearing
liabilities which amounts to R100 million. The remaining balance of
the net proceeds totalling approximately R378.4 million is assumed to
be invested in cash and cash equivalents.
6 Finance costs are assumed to be reduced as a result of the repayment
of approximately R100 million of interest-bearing liabilities at the
beginning of the year ended 30 June 2010. Hospitality`s historical
weighted average cost of debt of 10.16% is assumed to apply throughout
the year ended 30 June 2010.
7 Additional finance income is earned on net proceeds of R378.4 million
which is assumed to be invested in cash and cash equivalents at
Hospitality`s historical average rate on its 32-day call account of
6.52%.
8 The additional distributable income which results from the saving in
finance costs and earning finance income, detailed in notes 6 and 7
above, is assumed to be earned evenly throughout the year ended 30
June 2010.
9 All adjustments, with the exception of the incurrence of transaction
costs, will have a continuing effect.
The following notes and assumptions are applicable in respect of the "After the
rights offer and after the transaction" column:
10. The Arabella hotels are assumed to be acquired with effect from 30
June 2010 for a purchase consideration of R741.2 million.
11. The net proceeds of the rights offer (after payment of estimated costs
of R11.6 million) of R478.4 million, which was originally assumed to
be utilised to repay the floating portion of the interest-bearing
liabilities and invested in cash and cash equivalents, is assumed to
be utilised to partially fund the acquisition of the Arabella hotels.
12. The balance of the purchase consideration of R262.8 is assumed to be
funded through new debt facilities from Nedbank Limited.
13. Hospitality will assume approximately R26 million of working capital
liabilities of the Arabella hotels.
14. The Arabella hotels have been valued at R933.4 million by Gensec
Property Service Limited (trading as JHI) (who are independent valuers
registered as professional associate valuers in terms of the Property
Valuers Profession Act, No. 47 of 2000). The acquisition of the
Arabella hotels has been accounted for in terms of IFRS 3 Business
Combinations (2008) which provides that net assets which are acquired
should be recorded at their fair value. Accordingly the difference of
R192.71 million between the purchase consideration of R741.2 million
and the fair value of the Arabella hotels of R933.4 million has been
recorded as negative goodwill and is included as part of accumulated
profit.
FORECAST FINANCIAL INFORMATION
Set out below are the profit forecasts ("the profit forecasts") of the Arabella
hotels for the 7 months ending 30 June 2011 and the year ending 30 June 2012
("the forecast periods"). The profit forecasts have been prepared on the
assumption that the transaction will be implemented on 1 December 2010 and on
the basis that the profit forecasts include forecast results for the forecast
periods.
The profit forecasts, including the assumptions on which they are based and the
financial information from which they are prepared, are the responsibility of
the directors of Hospitality. The profit forecasts have not been reviewed or
report on by the independent reporting accountants.
The profit forecasts have been prepared in accordance with the group`s
accounting policies and in compliance with IFRS.
Forecast Forecast
for the for the
7 months year
ending ending
30 June 30 June
2011 2012
R`000 R`000
Rental 45 578 85 486
Profit before debenture interest 23 474 57 212
Total profit and comprehensive 187 030 -
profit for the period / year
Distributable earnings 29 154 57 212
Number of linked units in issue
A-linked unit 21 030 043 21 030 043
B-linked unit 21 030 043 21 030 043
Weighted average number of linked
units in issue
A-linked unit 12 214 710 21 030 043
B-linked unit 12 214 710 21 030 043
Distribution per linked unit
(cents)
A-linked unit 71.23 128.22
B-linked unit 67.40 143.83
138.63 272.05
Earnings and headline earnings
per linked unit (cents)
A-linked unit 1 769.87 272.05
B-linked unit 1 769.87 272.05
3 539.73 544.10
The profit forecasts incorporate the following material assumptions in respect
of revenue and expenses that cannot be influenced by the directors:
- The maximum amount of R490 million in terms of the rights offer has been
raised.
- Lease agreements with fixed and variable components will be concluded for
the Arabella hotels.
- Revenue is fully contracted and is based on lease agreements with fixed and
variable components.
- Approximately 50% of the projected revenue to Hospitality from the Arabella
hotels under the lease agreements will be fixed while the remaining 50%
will be variable. The total lease payment (fixed and variable) equates to
95% of each hotel`s EBITDA, with the remaining 5% being retained by the
tenant.
- There are no unforeseen economic factors that will affect either the
lessees` ability to meet their commitments in terms of the existing lease
agreements or the forecast future profitability of these properties.
- Interest payable on the debt funding will be in accordance with the rate of
10.19% (JIBAR + 2.90%) as specified in the relevant loan agreement with
Nedbank Limited.
- Any excess cash will be applied in reducing long-term borrowings.
- The properties are assumed to be transferred with effect from 1 December
2010.
- No future properties will be acquired and no properties will be disposed of
during the forecast periods other than those being acquired in terms of the
transaction.
- 99.99% of the operating profit after interest will be distributed to unit
holders.
- Debenture interest will be paid to A-and B- linked unit holders in
accordance with the provisions of the debenture trust deed.
The profit forecasts incorporate the following material assumptions in respect
of revenue and expenses that can be influenced by the directors:
- Operating expenditure has been determined based on discussions with
vendors, historical costs and the forecast costs per the valuers` reports.
- The assumptions applied in arriving at EBITDA for the lease agreements
includes, inter alia:
- occupancies in line with historic occupancies, taking into account expected
future supply and demand;
- inflationary increases in actual daily room rates to forecast revenue per
average room rate;
- expenses, as a percentage of revenue in line with industry norms, whilst
considering the nature of the individual hotels; and
- management fees in line with management contracts.
WITHDRAWAL OF CAUTIONARY
Hospitality linked unitholders are referred to the cautionary announcement dated
31 August 2010 and are advised that following the release of the financial
effects of the rights offer and the transaction, caution is no longer required
to be exercised by linked unitholders when dealing in their linked units.
1 October 2010
Lead transaction sponsor and corporate advisor
Java Capital
Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Independent reporting accountants and auditors
KPMG Inc.
Legal advisor to Hospitality
Mkhabela Huntley Adekeye Inc.
Date: 01/10/2010 12:25:01 Produced by the JSE SENS Department.
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