The reason for yesterday’s $1.1 billion fund raising from property group, Mirvac was buried in the announcement.
Mirvac has cut the value of its assets for a third time in a year and it needs the cash to keep the banks on side and happy.
It joins the likes of GPT (twice of around $3 billion and Stockland (twice for $1.85 billion) in the past eight months.
And, while signalling the 2009 financial result might be a touch better, it said securityholders can expect no change in distribution from the estimate given in February, and that now applied to the new 2010 financial year.
But the nastiest news was the cut in asset values.
"Mirvac has reassessed the value of its investment properties, residential and non residential developments, intangible assets and co-investments in managed listed funds.
"As a result, Mirvac has reduced the carrying values of these assets by approximately $582 million.
"The expected changes to carrying values are subject to finalisation of year-end audited accounts and acceptance by the Board."
That came after around $712 million in write-downs and impairments in the interim report in February and another $400 million revealed in the annual profit statement last August.
In all, almost $1.7 billion in losses and write-down of asset values across the company: property, land, investments, shares, infrastructure.
No wonder the company has had to raise around almost $1.3 billion since last November (and more earlier in 2008).
Without a capital raising, a reduction of this size would have blown a hole in the company’s balance sheet.
Whether it would have been so large without the funding raising, is another thing.
But the cash will be more than handy.
It continues Mirvac’s dash for cash.
It raised around $500 million late last year in an issue similar in type to the one announced yesterday. In February 2008 it revealed a $300 million placement with Dubai property giant, Nakheel, which then built up a stake of close to 15%.
But that was cut when Nakheel didn’t participate in the late 2003 placement. It is on 10.67%. The other major shareholder is the Government of Singapore through the Government Investment Corporation (around 5%).
Yesterday’s press statement made no mention of whether either company will be involved in the funding.
Nakheel is broke and was recently bailed out by its major shareholder, the Royal Family controlled Dubai Government.
That money is reported to have come from a $US10 billion investment by the UAE central bank in a $US20 billion fund raising that the Dubai government has been undertaking.
Mirvac said it will undertake an equity raising of up to $1.1 billion to "accelerate the implementation of its simplified business strategy".
Mirvac will conduct a fully underwritten five-for-nine pro-rata entitlement offer to institutional securityholders to raise approximately $710 million.
A further $155 million will be raised through a fully underwritten institutional placement.
A $235 million retail component of the entitlement offer, not underwritten, could increase the proceeds of the capital raising to $1.1 billion, Mirvac said.
(It doesn’t trust shareholders.)
Under the entitlement offer, securities will be offered for $1, a 24.2% discount on their closing price on Wednesday of $1.33.
Mirvac CEO Nicholas Collishaw said the new capital would accelerate Mirvac’s strategy of increasing investment earnings and re-focusing residential development work on large-scale projects.
"We announced our simplified strategy in August last year,” Mr Collishaw said in a statement.
"This offer strengthens our balance sheet, enhances our liquidity and further positions the group to accelerate our strategy."
Mirvac valuation cuts included: $240 million write-down in the value of its entire investment property portfolio, $203 million being written off non-core inventory, $40 million written off completed and unsold inventory, and $8 million written off core projects, reflecting revised development feasibility assumptions.
"The impairments to development inventory rebase the carrying value of non-core assets to disposal value, allowing us to exit these projects in the near term,” Mr Collishaw said.
"We intend to reshape our residential development portfolio to focus on core, large-scale projects – one of our key competitive strengths.”
Mirvac updated its earnings guidance to a range of $190 million to $200 million for the 2008-09 financial year.
The higher end of that range remains in line with previous guidance, the group said in the statement.
Mirvac reaffirmed its distribution guidance of between eight and nine cents per stapled security, and said a similar distribution would also be paid for the 2009-10 financial year.
