Embattled developer and real estate investor Goodman Group said yesterday it had a $300 million cash lifeline from Macquarie Group, providing nine months of breathing space and enough liquidity to repay all debt due in 2009.
Some $460 million of debt is due this Saturday, so it seems to have been a close-run thing for Goodman.
And more than $200 million is due later in the year.
The facility from Macquarie Bank, is repayable in nine months, expiring on February 20, 2010, Goodman said in a statement to the ASX yesterday.
The market didn’t take the news well. Goodman shares fell 17.5% or 5 cents to 23.5c.
Not a great start for the reunited relationship of Goodman and Macquarie, which was the mystery financier Goodman referred to in statements three weeks ago.
Goodman group chief executive officer, Greg Goodman, said the company was "pleased with the support provided to the Group by Macquarie, who know our business very well".
The deal reunites the once joined at the hips groups that cut a swathe through logical property investment plays a few years ago, and expanded into offshore markets with flair and ambition.
But all that went awry as the two groups went their separate ways: Goodman it seems, had bigger ambitions.
It prospered for a while, but then the credit crunch bit and the recession and collapse of investor support for the Australian real estate investment trust (and infrastructure model) as typified by Goodman, left it high and dry and short of cash.
Back in 2005, Macquarie Goodman Group as it was then known, combined the business activities of its internally-managed industrial fund with responsible entity, Macquarie Goodman Management, to create an internally managed, vertically integrated industrial property fund. (That was the rage then in the sector. GPT did the same, for example.)
At the time Macquarie Goodman had a market capitalisation of about $5.3 billion, making it the largest industrial property group listed on the ASX, but just over a year later, the two parted company as the REIT boom peaked.
Goodman has raised hundreds of millions of dollars in staff sackings, restructurings and other share deals, to no avail. A company that had a security price of $4.50 a year and a half ago, is now around 26c.
Mr Goodman said the facility addressed Goodman’s immediate debt refinancing need and "enables Goodman and its advisers to execute on a range of further capital management initiatives to ensure the Group is well capitalised for the long term".
"Our key focus remains the de leveraging of the business," Mr Goodman said in the statement.
The facility expires in nine months but is extendable for a further 15 months.
Goldman Sachs JBWere said yesterday in a short note that the refinancing package provided only a short-term "solution" to Goodman’s debt refinancing problems – especially with a further $759 million of facilities due to expire in 2010-11 (of which about $649 million was drawn at December 31, 2008).
The suspension of the second half 2008-09 dividend (announced to the market on May 1) will help boost liquidity of about $269 million.
Goodman says it is secured with covenants comparable to those in Goodman’s existing common terms deed poll.
With the $300 million facility, Goodman’s lenders will receive options over 414 million Goodman stapled securities at an exercise price of A$0.30 with a two year term.
That is a premium to Goodman’s current price of 26.5c, down 2c for the day.
The proceeds of the facility and surplus liquidity will be used by the Group to repay Tranche A of the syndicated facility, Goodman said.
"The Facility also provides Goodman with sufficient liquidity to repay all facilities scheduled to expire during 2009," the company said.
"Goodman is in advanced discussions with its existing lenders to refinance and extend the term of approximately $225 million of debt due to expire in September and December 2009.
"Successful refinance of these facilities will provide incremental liquidity to Goodman."
Goodman said it also was in discussions with "additional strategic investors regarding potential investments in the Group and its underlying funds".
"These discussions may result in an upsizing of the Facility and it is contemplated that additional investors would participate on the same terms as Macquarie."
If the Facility is increased, Goodman said additional Options will be issued, subject to securityholder approval.
"It is intended that the exercise of the Options will be used to partially repay the Facility or, if exercised after the Facility has been repaid, for the repayment of other debt or working capital.
"In the event that the Options are not approved by securityholders, the Lenders will be entitled to a cash amount from Goodman equivalent to the value of the Options as if they had been granted and were exercised during the term of those Options."
