CapitaMall Trust’s Smart Financing Move

Ser Jing - Shopping for CapitaMall Trust's First Quarter Results (picture)

Real estate investment trust Capital Mall Trust (SGX: C38U) announced yesterday evening that it had issued S$100m worth of 3.15% fixed rate notes due 18 Dec 2020 under its S$2.5b Multicurrency Medium Term Note Programme.

This follows a 13 Nov 2013 announcement that it had issued 10b yen (approximately S$120m) worth of 1.039% fixed rate notes due 13 Nov 2020 under the same programme.

All told, the REIT, which owns a portfolio of retail malls located in Singapore, has assumed a rough total of S$220m worth of new debt, carrying annual interest rates of 3.15% and 1.039%, depending on the issue.

What’s interesting here for investors to note is how CMT, a subsidiary of real estate companies CapitaMalls Asia (SGX: JS8) and CapitaLand (SGX: C31), had protected its debt-maturity profile despite issuing more debt.

CMT’s Debt-maturity profile

The chart below is excerpted from the REIT’s presentation for the November 2013 Morgan Stanley Asia Pacific Summit. The aforementioned note-issues aren’t included in the chart.

CapitaMall Trust Debt

Source: CapitaMall Trust Morgan Stanley Asia Pacific Summit

We can see that there’s a nice chunk of debt totalling S$1.3b that’s coming due over the next two years, and there’s no debt due on 2020 and 2021. By taking on new debt with maturities in 2020, CMT now has added funds that can go on to help pay down some of the loans coming due in 2014 and 2015.

At the same time, the REIT has smartly avoided piling on debts in other years.

Debt-maturity profiles are quite important for heavily leveraged entities like REITs as debts that are evenly spread out lessens the risk of them being unable to secure capital to repay creditors.

By spreading out the repayment dates for its debt, CMT has given itself more breathing room to arrange for various methods of refinancing in the event that credit markets worsen in any given year.

Foolish Bottom Line

Companies, REITs, and business trusts often undertake financing actions that are either beneficial or detrimental for investors depending on the type of action taken. It thus pays for investors to keep a close watch on how their financing activities are conducted.

In CapitaMall Trust’s case, its latest debt issue does not seem to have much to complain about.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn’t own shares in any companies mentioned.