Precinct considers bond offer, lifts first-quarter dividend

Chairman Craig Stobo said "Diversifying our funding sources remains a core component of Precinct’s capital management strategy"
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Precinct Properties New Zealand is considering a seven-year bond offer to repay bank debt.

The listed commercial property investor says it is considering making an offer of secured, unsubordinated, fixed-rate seven-year bonds to institutional and New Zealand retail investors, with details to be released next week when the offer is expected to open. It has appointed ANZ, First NZ Capital and Forsyth Barr as joint lead managers and Hobson Wealth Partners as co-manager.

"We believe this option is well suited to Precinct's current strategy and will further improve our capital structure post issue," chairman Craig Stobo said in his speech to the company's annual meeting in Auckland this morning, according to notes published on the NZX. "Diversifying our funding sources remains a core component of Precinct's capital management strategy. We will prudently consider future funding options, which are well suited to Precinct's strategy and further improve our capital structure."

Precinct increased annual profit 17% to $162.1 million in the latest financial year ended June 30. Mr Stobo said the company's gearing was now at 18%, from 25.1% at the end of 2017, after the company raised $150 million of four-year, fixed-rate subordinated convertible notes in September.

The company also today said it would pay a 1.45c cet per share first-quarter dividend, up 3.6% on a year earlier. It expects to pay a 5.8c per share dividend for the 2018 financial year, up from 5.6c in 2017, and is confident about the dividend growth into the future.

The shares dipped 0.4% to $1.29, and have gained 7.9% this year.

(BusinessDesk)


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15 Comments & Questions

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This is why more "Mums 'n Dads" do not trust our share-market.
A company seeks to raise money to reduce bank debt at the same time as declaring an increased div. payout. And it is all legal.
But I'm not an economist, so I wouldn't understand!!

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Gearing is only 18%. Where's the problem?

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John,you don't have to be an economist,accountant or have much in the way of training to understand what's going on here.just an open mind.precint has assets financed by equity and debt.it looks like they are proposing to swap some short term bank debt for longer term debt from the debt markets.thats all.nothing sinister.the dividend is funded from profits after paying interest on their debt so just normal stuff.ive owned shares in it since it listed and it's done ok.

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Gearing is only 18%. Where's the problem?

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Don't come the raw prawn with me Mr Oliver.
It is "18%" of what? A value underpinned by a ?? share value?
Let us revisit Precinct in 12 months shall we?

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I think it’s 18% of independent valuations of the properties owned. I don’t get your point.

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Yes it is...nothing to do with the share price...if John Morrison is worried about the valuation the culprit is low interest rates not some unspecified conspiracy of anonymous economists...

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Value underpinned by millions of dollars worth of prime office buildings with low gearing ie low indebtedness. This company is decades old allowing for two or three name changes. It is ridiculous to imagine it will be in trouble in 12 months time.

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Except that swapping one form of debt financing for another doesn't seem likely to do anything very much, other than for the investment banking community.

There can be indirect reasons for wanting to switch from short- to long-term debt, but most of them are not good.

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Out of interest Steven what are the "not good reasons for switching from short term debt to long" ? Treasurers always need to be selling long dates bonds to preserve their average maturity profile because time ticks on.where they try to add value is issuing long dated paper at low points...hard to do I know.

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Like unable to roll over existing facility?
"Mums and Dads easier touches than the Banks?

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18% gearing means debt is 18% of debt plus equity.From which it follows that equity is 82% of debt plus equity. That is the proportion of the total assets (debt plus equity ) which they own is over 4.5 times what they owe. How many recent home buyers can say this? Does this really look as if they could not refinance the bank loan?
Replacing short term bank loans with longer term debt is good business practice and will likely be at a lower rate.
Borrow long lend short is the golden rule.

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" "Golden rule" "Borrow long lend short"!
Pardon? Did no one tell them that when they borrowed the "bank debt" they "want to repay".
You Mr Oliver along with Mr Sheather do illustrate why so many are wary of investing in share markets.
People expect and accept "spin" from their politicians. They can do nought about it.
But spin from an investment facility?
If everything is as you two say, and I have no knowledge to doubt it is. Then why the big public declaration about doing normal business? People/businesses are renewing loans/bank facilities everyday??
I repeat, we need "Mums and Dads" to have confidence in our NZX. If we want our NZX to grow we need to talk to them without the spin.

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Some people got badly burnt in the GFC and as a result appear to have "learnt" that All financial products are All the same and All to be avoided.
Not so.

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If you can't roll a short bond you have no hope of issuing 7 year paper,I would have thought.

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