57
ANNUAL REPORT 2015
FRASERS HOSPITALITY TRUST
FINANCIAL REVIEW
are to maintain a strong balance
sheet through prudent and proactive
capital and financial management, to
ensure continuous access to funding
at optimal cost and to maintain
stable distributions to its stapled
securityholders.
Underpinning these objectives,
the REIT Manager has developed a
framework of policies and guidelines
for FH-REIT to actively manage its
capital structure and loan portfolio
mix, which has a direct impact on
gearing and distributions to stapled
securityholders. When funding
acquisitions, the REIT Manager
considers the most appropriate mix
of debt and equity and manages the
cost of funds by ensuring that FH-
REIT has access to diversified sources
of funding in both the debt and
capital markets.
The policies and guidelines also
ensure that the REIT Manager is
prudent in managing the interest
rate risk arising from FH-REIT’s
borrowings and foreign exchange risk
arising mainly from foreign sourced
income. By hedging the interest
rate risk and foreign exchange risk
using suitable derivative financial
instruments, the income available
for distribution will be less exposed
to fluctuations in interest rates and
exchange rates.
During the IPO, Moody’s Investors
Service had accorded FHT with a
Baa2 rating. This rating helped FH-
REIT to secure unsecured bank loans
at more favourable rates.
The REIT Manager proactively
manages the capital structure and
debt currency mix of FH-REIT to
achieve a balance between natural
hedge for FH-REIT’s foreign assets
and lower cost of borrowing. With
Singapore assets at 43.1% of total
portfolio value as at 30 September
2015, FH-REIT skewed its borrowing
to SGD loan which was taken up
at relatively low interest rate. To
have natural hedge for its Malaysia
and Japan assets, FH-REIT issued
medium term notes in Malaysia
(denominated in Malaysian ringgit)
and TMK bonds in Japanese yen to
partially finance the acquisition of
these assets.
To manage interest rate exposure,
shortly after the IPO, FH-REIT entered
into a cross currency swap to convert
a portion of its Singapore dollar
floating-rate loans to JPY fixed-
rate debt and entered into interest
rate swaps to fix interest rates for a
significant portion of its borrowings.
In July 2015, FH-REIT acquired the
Sofitel Sydney Wentworth, financed
by a combination of equity raised
through a private placement and
Australian dollar debt. With reduced
interest rate in Australia, FH-REIT
was able to bring in natural hedge
for its Australian assets through
debt financing of Sofitel Sydney
Wentworth at lower cost of
borrowing.
As at 30 September 2015, FH-
REIT has achieved a balanced loan
portfolio mix providing natural hedge
for its foreign assets and achieved
an all-in-cost of borrowings at
2.4% per annum in FY2015. As of 30
September 2015, the proportion of
fixed rate loans stood at 73.0% and
FHT’s gearing was 38.9%.
On an ongoing basis, the REIT
Manager will continue to actively
manage the capital structure and the
financial risks of FH-REIT in order to
meet the stated objectives.
USE OF THE IPO PROCEEDS
In July 2014, gross proceeds of
SGD367.9 million was raised from the
IPO.
We have utilised the proceeds and the
amounts allocated as outlined in the
IPO Prospectus dated 30 June 2014.
As at 31 December 2014, additional
consideration of SGD3.7 million was
paid for the acquisition of Excellence
Prosperity TMK Pte. Ltd., Kobe
Excellence TMK and Excellence
Prosperity (Japan) K.K. based on the
final net asset value of the completion
accounts as at 13 July 2014. The
additional consideration was partially
settled by the savings from issue-
related costs during IPO, attributed
to lower professional fees, lower
spending on prospectus production,
road show and other expenses.
The remaining proceeds from the IPO
of approximately SGD280,000 were
fully disbursed towards the payment
of professional fees by 31 March 2015.
USE OF THE EQUITY FUND RAISING
PROCEEDS
On 25 June 2015, FHT announced
the launch of a private placement of
150.0 million new stapled securities
of FHT to raise gross proceeds of
approximately SGD123.0 million to
partially fund the acquisition of Sofitel
Sydney Wentworth. The private
placement of 150.0 million new
stapled securities of FHT closed on 26
June 2015 and the 150.0 million new
stapled securities were issued and
listed on 6 July 2015.
The proceeds of approximately
SGD120.0 million had been utilised
to part finance the purchase
consideration of Sofitel Sydney
Wentworth. Out of the SGD2.9
million raised for the professional and
other fees and expenses incurred
in connection with the acquisition,
SGD500,000 remains unpaid as at
30 September 2015. The proceeds of
approximately SGD100,000 was used
for working capital purposes and was
fully disbursed as at 30 September
2015.
Such use of proceeds from the
private placement is in accordance
with the intended use of proceeds
from the private placement is in
accordance with the intended use
of proceeds previously disclosed in
FHT’s announcements dated 25 and
26 June 2015 in relation to, among
other things, the private placement.
