Published August 19, 2009

CapitaLand allots $1b to Ascott, China, Viet arms

Group expects to reduce cash levels from $2.8b to $1-2b over 6-12 months

By KALPANA RASHIWALA
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PROPERTY giant CapitaLand has deployed about $1 billion from its $1.8 billion rights issue earlier this year to grow its China, Vietnam and Ascott businesses. The money will be used to increase the respective capital base of these three wholly owned businesses of the group.

Thinking long-term: Mr Lim (left) and Mr Liew. Vietnam offers potential to be the group's fourth growth pillar - after Singapore, China and Australia, says Mr Liew

CapitaLand group CFO Olivier Lim said that, over the next 6-12 months, the group expects its corporate treasury cash levels to be reduced from the existing $2.8 billion to $1-2 billion, partly by pre-paying debt that matures in the next two to three years, and partly by deploying capital to investment opportunities that may arise.

The $2.8 billion corporate treasury cash is part of the $4.2 billion cash and cash equivalents as at June 30, 2009, as reported with CapitaLand's first-half results last month.

Half or $500 million of the additional capital deployment will go to CapitaLand China Holdings, $299 million to CapitaLand (Vietnam) Holdings and $200 million to serviced apartment chain The Ascott Group.

The balance of about $800 million will be set aside for further investment opportunities that the group's business units may identify, CapitaLand added.

The group's $1.1 billion convertible bond (CB) issue, which was announced late last month, was upsized this week to $1.2 billion. Upon settlement of that CB issue, CapitaLand will have more than $4 billion of long-term core debt comprising CBs and medium-term notes with an average maturity exceeding six years, the group said.

'This core debt position provides the group with a safe capital structure that can withstand market stresses that might arise through a business cycle.'

Following the additional capital deployment, the paid-up capital of CapitaLand China has increased to $1.45 billion; CapitaLand (Vietnam), to $300 million; and Ascott, to $472.3 million.

CapitaLand group president and CEO Liew Mun Leong said that Vietnam offers potential to be the fourth growth pillar for the group - after Singapore, China and Australia. 'We are thus increasing our capital and human resources in the country.

'We continue to remain committed to our existing projects in the Gulf Cooperation Council region, Thailand, Malaysia, Japan and India. Our focus will continue to be in Asia, which has strong fundamentals, greatest opportunities, and where we can leverage on our established operations on the ground.'

CFO Mr Lim, declaring that the group had met its capital management objectives for extending debt maturities, reducing leverage, and increasing cash liquidity, said: 'Looking back, the point of maximum stress in the markets was between September last year and March this year.

'Since then, there has been broad recovery in almost all risk classes, the most notable of late being the credit markets globally which saw significant improvement in the last two months.

'There are still remaining risks, in particular, whether economies and financial markets might experience a double dip. Looking forward, while the group remains vigilant and sensitive to these risks in the short term, it is firmly focused on the long-term opportunities for growth.'

In the stock market yesterday, CapitaLand ended seven cents higher at $3.63.