360 Capital Developments Income Fund
strategy
Developments Income Fund assets comprise two loans totalling $45.0m in favour of the 360 Capital Office Fund, which is in breach of its loan covenants.
As a subordinated lender to the Office Fund, the Fund has entered into forebearance to allow the Office Fund time to reduce debt via orderly assets sales and permit a refinancing of its senior debt. The Office Fund will then address the Fund’s loan, in turn allowing the Fund to address its debt with Bank of Scotland International (BOSI).
As at 30 June 2011, the loans were impaired to $36.3m excluding unpaid interest fully impaired by $19.5m.
In the six months to December 2011, the refinancing and stabilisation of the Office Fund allowed the reversal of the previous impairment of the loans whereby the loans are now impaired to $45.0m excluding unpaid interest fully impaired by $25.8m.
As a result NTA per Unit as at 31 December 2011 increased 63% from $0.48 per Unit to $0.78 per Unit. While unpaid capitalised interest remains fully impaired to $25.8m and the interest rate on the loans has been renegotiated from 19.6% to 10.0%, the Fund is now accruing for this interest, payable in cash, and will also look to claw back the $25.8m if circumstances permit.
During the Half Year to 31 December 2011, the BOSI finance facility was extended until 30 March 2012, in order to give the Fund time to receive capital repayments from the Office Fund.
The Fund’s forbearance strategy best preserves Fund asset value. During the first half of FY2012, the Office Fund sold $26.7m of assets and was able to refinance its debt facilities. Upon the Office Fund's sale of the Mt Gravatt property, and amortisation of NAB's debt, 360 Capital will consult Unitholders and recommend strategies to realise Unitholder value. Based on the Office Fund’s disposal program, a recommendation to Unitholders is expected to be made prior to 30 June 2012.
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