The Link Real Estate Investment Trust (Link Reit) further strengthened its liquidity position as it braces for expansion both inside and outside Hong Kong as it tapped the US dollar bond market for the first time.

The company, through its wholly-owned financing subsidiary The Link Finance (Cayman) 2009, on August 26 raised US$500 million through a 10-year bond offering. The Reg S deal was priced at 99.286% with a coupon of 3.60% to offer a yield of 3.686%.
This was equivalent to a spread of 130bp over the US treasuries, or at the tight end of the final price guidance of between 130bp and 135bp, and 15bp inside the initial guidance of 145bp area.

The bonds are guaranteed by The Link Holdings, The Link Properties and HSBC Institutional Trust Services (Asia) as the trustee for The Link Reit. The transaction, issued under Link Finance’s US$2 billion medium-term note programme, garnered an order book of US$1.8 billion from 132 accounts with 94% of the bonds distributed in Asia and 6% in Europe.

The paper was allocated to high quality accounts with fund managers taking 46%, insurance companies and pension funds 32%, banks 20% and private banks 2%.
ANZ, DBS Bank and HSBC acted as the joint bookrunners for the transaction.

The Link Management CEO George Hongchoy describes the investors’ response to the deal as a testimony to the company’s commitment to improving Link Reit’s business and financial performance. “The notes have not only broadened the funding source of The Link Reit, but also strengthened the group’s liquidity position and improved protection against potential interest rate increase,” he says.

Franco Leung, vice-president and senior analyst at Moody’s Investors Service, which assigned an A2 rating to the deal, agrees, as he points out the new issue will enhance The Link Reit’s funding stability, through strengthening its liquidity position.

The company, he adds, has recently announced plans to dispose of five properties which are among those with limited synergy within the portfolio. “These sales, if they materialize, will potentially boost the real estate investment trust’s liquidity and support its expansion plans,” notes Leung.

The Link Reit said on August 18 that it had agreed to purchase the Lions Rise Mall in Hong Kong from Kerry Properties for HK$1.38 billion (US$178 million).