GPT yesterday had a chance to confirm or deny media reports that it was looking to raise up to $A1.6 billion.
Instead it asked for trading in its securities to be suspended.
No wonder. What was revealed in the media this morning is nothing short of outrageous for holders of the group’s securities.
Control of the company will pass to the Singapore Government; the $1.8 billion invested in the dodgy European joint venture with Babcock and Brown has evaporated, and senior management are rightfully walking the plank.
GPT has followed other property players by ousting its chief executive and reshuffling its management as it struggles to cope with the global credit crisis.
This morning GPT will confirm a $1.6 billion capital raising, the departure of CEO, Nic Lyons and chairman Peter Joseph, who is not standing for ere-election to the board at next year’s AGM.
The company’s share price had dropped from $3.80 in May to $1.15 before a trading halt was called yesterday morning. It will drop even further after the issue details are revealed.
GPT will announce the huge $1.6 billion issue to be made through new convertible notes and a rights issue to existing holders that will see the Singapore Government’s investment arm, GIC, emerge as a substantial shareholder.
As GPT’s market capitalisation is only $2.5 billion, the potential watering down of existing holders is going to be massive, unless they put their money where their mouths are and take up shares in the rights issue.
GPT has extensive shopping centre and commercial property interests in Australia. It used to be a part of Lend Lease and owns half share of the Darling Park towers 1 and 2, and all of tower 3; and a 50% stake in both Australia Square and the MLC Centre. The latter buildings are Sydney landmarks.
Chairman, Peter Joseph is going: he was a driver of GPT’s de-merger from Lend Lease three years ago which saw Westfield involve itself to frustrate Lend Lease. Mr Joseph will not seek re-election at the group’s annual general meeting on May 1 next year.
The company went off on an adventure in Europe with Babcock and Brown that has soured, and plunged into retirement properties in the US in a deal that has also gone bad.
It has huge debts and the high quality Australian assets have been used to support these lower quality offshore adventures.
Yesterday GPT told the ASX:
"The trading halt is requested as a result of an article in today’s Australian Financial Review regarding a potential capital raising by GPT," GPT said in a statement.
"GPT requests that the trading halt remain in place until it is in a position to make a further announcement to the market in response to that article."
GPT stapled securities last traded at $1.15.
Details of the issue and changes in management emerged late last night.
At $1.15, GPT is valued at $2.55 billion.GPT has 2.099 billion securities on issue, so the dilution of existing holders will be substantial, potentially approaching 50%.
In July GPT securities plunged to a 24-year low when a large cut to its profit guidance shook investor confidence in the company and the embattled property trust sector.
The securities were trading at just under $2.50 each. They had been $3.50 in May of this year and over $5 in February, 2007.
In July GPT blamed problems including the postponed sales of office developments, poor performance by its European joint venture with Babcock & Brown, and declining occupancy across its aged-care facilities in the US.
GPT has cut its forecast earnings to $464 million, down from previous guidance of $633 million, for the 12 months to December 31.
The downturn also forced GPT to cut in its distribution for the year, like so many other property groups, such as Mirvac, Valad etc.
Hopefully that will be updated when the issue and other changes are officially announced today.
According to this morning’s Sydney Morning Herald Mr Lyons joins a long line of departures among his peers in the listed property sector, such as Andrew Scott at Centro, Greg Paramor from Mirvac, the soon-to-depart Greg Clarke from Lend Lease and Valad Property’s Stephen Day, who stepped down as chief executive due to health concerns.
The SMH said that GPT has written off its $1.8 billion interest in a European joint venture with Babcock & Brown to zero on its balance sheet and more than halved its forecast distribution.
The annual distribution will now stand at about 7.25c, down from 20c the previous year.
Through its advisers UBS, Deutsche Bank and Goldman Sachs JBWere, GPT will seek to raise $1.6 billion through a $250 million convertible note issue, underwritten by GIC.
The remainder will be through a book-build rights issue at prices between 60c and 75c, of which GIC will also underwrite a 25%.The size of the discount to the market price of $1.15 tells us just how bad GPT has gone and the damage done to those offshore adventures, especially with Babcock and Brown.
Earlier this month leading property trust Stockland raised $300 million in equity and has spent it on two retirement property plays in Aevum and FKP.
On Tuesday Stockland confirmed that its earnings per share guidance would be 7% lower, assuming normal earnings per share growth and the international and Australian economic position not worsening.
Stockland has had troubles (Like Lend Lease and Valad) in the collapsing UK property sector where values are down 20% to 25% and more in some parts.
GPT is on the nose because of the Babcock and Brown joint venture and the bad publicity from its partners’ financial and operational problems this year. Now the full cost of that association has been revealed $1.8 billion go
