Vicinity Centres (Vicinity, ASX:VCX) has today successfully completed a fully underwritten placement of fully paid new stapled securities (‘New Securities‘) to institutional and professional investors, at the offer price of $1.48 per New Security (the ‘Placement’), details of which were announced to ASX on 1 June 2020. The Placement received strong support from existing securityholders and demand from potential new investors, raising $1,200 million.The fully underwritten institutional placement will reduce gearing from 26.6% from 34.9% pre-placement.
This equity raising will strengthen Vicinity’s balance sheet and provide Vicinity with flexibility to respond to the uncertainty caused by COVID-19 and the evolving retail landscape. The net proceeds from the Placement will be used to repay debt.
It is expected that Vicinity securities will recommence trading on ASX from market open today, following a trading halt on 1 June 2020.
Settlement of the approximately 810.8 million New Securities to be issued under the Placement is scheduled to occur on Thursday 4 June 2020 with allotment and normal trading of New Securities issued under the Placement to occur on Friday 5 June 2020. New Securities issued under the Placement will rank equally with existing stapled securities.
Vicinity Centre has experienced a significant decline in customers of as low as 50% in April. As government restrictions have started to ease during May customer traffic levels are now 74% of the prior year. The group has a wide-spanning retail portfolio which has experienced significant impacts on rental income.
Grant Kelley, CEO and Managing Director, said yesterday, “We are taking decisive action today to strengthen our balance sheet and provide Vicinity with flexibility to respond to the uncertainty caused by COVID-19 and the evolving retail landscape. This Equity Raising also provides support for the continuation of Vicinity’s investment-grade credit ratings.
The Gandel Group committed to subscribe for an additional $100 million of new securities in the placement. The Placement is fully underwritten by Credit Suisse (Australia) Limited and Macquarie Capital (Australia) Limited.
With more than 3,000 retailers representing 80% of it’s centre now trading in the Vicinity Centre portfolio is set to make a strong recovery. For the three month period, March to May 2020, 49% of billings have been received, which is broadly in line with Vicinity’s expectations and timing of the stabilisation of rental income remains uncertain.
Chadstone, Victoria
In addition, a non-underwritten Security Purchase Plan (‘SPP’) to raise up to a further $200 million has been put in to place. Eligible security holders in Australia and New Zealand will be invited to subscribe for up to $30,000 in additional securities, free of transaction and brokerage costs via an SPP. The new securities will be offered at the lower of the Placement price, being $1.48, and a 2% discount to the VWAP of fully paid ordinary Vicinity securities traded on ASX over the five trading days up to, and including, the closing date of the SPP offer period.
The group has deferred all non-critical capital expenditure and has deferred some major developments. 70% of the team have had their hours reduced until 30 June 2020 and the group have cancelled the FY20 Short Term Incentive Program.
Kelley said, “This equity raising, combined with a range of cost and capital reductions implemented to date, significantly strengthens Vicinity’s financial position. It provides capacity to invest in our assets to ensure they continue to deliver on consumer, retailer and community expectations.”
Preliminary draft valuations received as at 29 May 2020 indicate a reduction in aggregate asset value as at 30 June 2020 in the order of 11% to 13% or $1.8 billion to $2.1 billion. These valuations are preliminary and are subject to finalisation and audit. Final valuations could result in a change in aggregate asset value as at 30 June 2020 within, above or below this range, and will be advised once received, expected to be in mid-July 2020.
Like many of their property counterparts, the Vicinity Board has determined not to pay any distribution for the six months ending 30 June 2020.
