What the fuck, received an "Exchange Offer" from Tropicana. Seems like they are strong-arming sukukholders to accept this new shitty deal. If I read it correctly, if 75% of the sukukholders vote yes in the EGM, we have no choice in the matter and will be binded by the decision of the EGM!
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Last year, we published a write up on Tropicana, flagging out their liquidity issues and consistent delays in their asset disposal. Since then, the Group has made significant progress to recover from their high debt load through successful disposal of low yielding assets.
To briefly summarise their progress, Tropicana has managed to lower their total borrowings from RM3.5 billion in 1H23 to RM2.7 billion in 1H24, lowering their Debt-to-Equity ratio from 68% to 53%. They are expected to continue improving their balance sheet, with their announced sales of Tropicana Gardens Mall to IOI for RM680 million and a sale of a parcel of land in Gelang Patah for RM383 million.
Despite their liquidity issues showing signs of improvements, it still remains a concern in the short term. Nevertheless, the new Sukuk Programme of RM1.5 billion, together with the new issuance of RM450 million will support their refinancing of their maturing debt. Additionally, the planned refinancing aims to reduce interest costs from their perpetuals which is subjected to a coupon step-up of 2% upon the first call date.We are overall optimistic that they are able to reduce their leverage to a comfortable level, especially with an additional announced sales of RM1.2 billion, expected to be realised by the end of 2024. We opine that this will bring down their total borrowings to around RM2.3 billion with a Debt-to-Equity ratio of 45% and provide financing cost savings of around RM 24 million p.a.
On another note, earnings have improved YoY from RM19 million in 1H23 to RM60 million in 1H24, while unbilled sales of RM2.4 billion provides some earnings visibility in the short to medium term. Furthermore, we expect the positive sentiment surrounding Johor’s property market to continue to support Tropicana’s future outlook, given their sizeable landbank in the area.
In summary, we believe that the option to accept the New Sukuk is the best course of action given the overall less risky structure, fairly priced coupon rate and the added benefit from the 0.25% consent fee.
This email serves as a notification and no actions are required from you.
FSMOne shall vote on your behalf to accept the exchange offer.Please feel free to contact us should you need further assistance.
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This post has been edited by contestchris: Sep 12 2024, 11:30 PM Attached File(s)
Tropicana___Proposed_Exchange_Offer___Explanatory_Notes_and_FAQ__For_dis.._.pdf ( 793.1k )
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Splash._Exchange_Offer_Memo.pdf ( 465.96k )
Number of downloads: 4
Issuer_Letter___Notice_of_EGM__Appendix_3_.pdf ( 285.28k )
Number of downloads: 4
Jul 17 2024, 11:09 PM
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. They have announced several large property and land sales in the past few months, including Tropicana Mall. Should have the funds in place, it's not a very big issue.
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