| Tue 28 Jan 2003, 14:02 | | REDEFINE INCOME FUND GOES TO THE MARKET WITH R136- |
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Redefine Income Fund Limited
(Registration No. 1999/018591/06)
(a company incorporated in South Africa)
Share Code: RDF
ISIN Code: ZAE000023503
("Redefine" or "the company")
REDEFINE INCOME FUND GOES TO THE MARKET WITH R136-MILLION PLACEMENT OF LINKED
UNITS TO REDUCE LONG-TERM DEBT
MARKET DEMAND FOR PROPERTY LOAN STOCK COMPANY`S LINKED UNITS RESULTS IN
OVERWHELMING SUCCESS OF ISSUE FOR CASH
HYBRID property loan stock Redefine Income Fund today announced that it had
placed 54,6-million linked units for cash at R2,50 per unit to raise R136-
million (net of costs) which would be applied to partially retire long-term
debt, repay the bank overdraft, and thereby reduce its gearing level from 59
percent to 55,7 percent of total assets valued at R2,4-billion.
B O E Personal Stockbrokers handled the placement.
CEO Peter Penhall said: "We are delighted that the market demand for Redefine
linked units resulted in the overwhelming success of the issue for cash.
"The placement was a planned strategy determined late last year to reduce the
level of debt that rose to an uncomfortable level when Redefine acquired from
Rand Leases Properties (R L Props) a portfolio of 27 prime investment properties
for R356-million.
"Furthermore, the intended consequences have been to lower our gearing ratio
down to the 55 percent mark and to attain a market capitalisation exceeding the
R1-billion benchmark. We gave ourselves a deadline ended financial year August
31, 2003 to achieve these goals. Both have been reached within the first half-
year, which is good news for linked unit holders."
The placement will assist in reducing the effect of increased cost of finance
resultant from high short-term rates.
more
"We said at the time of the R L Props transaction that our gearing level was too
high, especially in the prevailing high interest rate environment, and that we
would implement measures as quickly as possible to cut this back. Application of
investor funds to reduce debt is clearly more favourable than asset disposals in
correcting the level of gearing."
Penhall said that the placement would also enhance the tradability of the
Redefine counter once the issue of linked units to institutions and individual
investors had worked its way into the market. The linked units have been taken-
up by a wide spread of investors covering major financial institutions, small
pension funds, fund managers, and individual clients of stockbrokers.
He recalled that negotiations with R L Props had covered an extended period last
year.
"Through a borrowing policy that took advantage of the lower interest rate
climate prior to the September 11 2001 tragedy, we had the facilities to include
cash and debt assumption in settlement of the deal to acquire the R L Props
portfolio at a strongly competitive price. At the same time, we assumed
responsibility for debt of R252-million. The prime objective was to ensure in
the interests of linked unit holders that R L Props, in which Redefine is
invested, would become debt free.
"In effect, taking over the R L Props debt represented a gearing of 71 percent
which we incorporated into Redefine`s balance sheet in the first quarter of
financial year 2003 thereby raising our own gearing ratio to 59 percent.
"The issue was simple: we were required to put in place a debt reduction
strategy - hence the issue for cash. "
Financial Manager Bradley Salters said: "It is important to note the issue for
cash enhances both market capitalisation and net asset value, with no material
effect on headline earnings."
Historic NAV goes up from a `before issue for cash` 244 cents per linked unit to
an immediate `post issue for cash` 245,38 cents per linked unit, while current
NAV, following the issue will be 259,8 cents per linked unit.
Salters said that, parallel with the issue for cash, Redefine took steps by way
of interest rate swaps to further hedge its overall debt position.
"Our intent in the current financial year has been to re-visit the cost of
finance, especially after taking over the R L Props debt. What we have done is
to negotiate a series of fixes covering a further R772-million of debt at an
average cost of just under 13 percent.
"With total debt now standing at R1,3-billion, Redefine has protected close on
100 percent for up to seven years through hedging as part of our policy of
financial management," he said.
Issued by
Far Out Communication cc
Communication and Editorial
Practitioners
Email: manucomm@iafrica.com
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Date: 28/01/2003 01:22:00 PM Produced by the JSE SENS Department
