It’s going to take a toll on DPU.
OUE Hospitality Trust’s (OUEHT) acquisition of Crowne Plaza Extension (CPEX) is DPU-dilutive, due largely to its reliance on a steeply discounted rights issue.
According to a report by OCBC, OUEHT recently announced a rights issue to raise gross proceeds of about $238.6m at an issue price of$0.540.
This is a 28% discount to yesterday’s closing price of $0.75, and a 23% discount to the theoretical ex-rights price of $0.698. The rights ratios is 33 Rights Stapled Securities for each 100 existing shares.
“In our previous forecast, we assumed 50% debt financing for the CPEX acquisition,” notes OCBC.
“We do note that the reliance on equity financing for the CPEX acquisition will reduce OUEHT’s gearing from 42.0% to 37.8%; leaving the manager with greater financial flexibility going forward,” OCBC adds.
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