It appears the real risk to BJT are in the loan covenants and capital hedges. How tight is the dscr to a declining rental market and how does the capital heges get repaid if the counter party redeems on August 15th?
See notes below from Dec results presentation.
Successfully restructured ¥21.1 billion loan secured by 3 properties to extend maturity on ¥6.6 billion for 2 years and improve LTV covenant in exchange for a 0.25% future increase in margin on extended portion of the loan (from December 2010)
Repaid A$56.5 million corporate facility in October 2008 from existing cash reserves. No corporate debt remains
All 5 separate loans comfortably comply with their covenants. Only one loan (representing about 23% of BJT debt) contains an LTV test – at 78%. None of the loans contain covenants which take into account foreign exchange hedging mark-to-market
The principal financial covenant under each loan is a debt service coverage ratio (“DSCR”) test
Interest cover¹ remains high at 3.7 times
MTM negative values of existing capital and distribution hedges are approximately A$58.5 million and A$27.9 million respectively as at 31 December 2008 (exchange rate of AUD1.00 = ¥62.45)
NTA impact of MTM negative value of existing capital hedges more than offset by A$182.7 million increase in NTA since 30 June 2008
Under certain hedges, both BJT and the counterparty have an early termination option which can be exercised annually on 15 August
The current MTM negative value of the hedging contracts that contain an early termination option is A$68.7 million
BJT Price at posting:
17.5¢ Sentiment: Buy Disclosure: Held
