CapitaLand Ascott Trust Preferential Offering Undersubscribed: What does it mean for unitholders?

What happened?

Earlier, we shared that CapitaLand Ascott Trust (CLAS) has also announced a preferential offering which offers unitholders the right to buy 29 new units for every 1,000 units held, at S$1.025 each.

The results on the allotment of the CapitaLand Ascott Trust preferential offering have been announced.

In total, only 64.7% of the total number of units offered under the preferential offering were subscribed for.

Let us dive deeper to understand how will the under-subscription of the CapitaLand Ascott Trust preferential offering impact unitholders. 

What you need to know about CapitaLand Ascott Trust Preferential Offering allotment result

#1 – Preferential offering undersubscribed by unitholders

Out of the total of 100.5 million of Preferential Offering units offered, CapitaLand Ascott Trust only received valid acceptances for 36.8 million units of 36.6% of total units issued.  

Of the balance of 63.7 million Preferential Offering units which were not validly accepted, 28.2 million units were allotted to satisfy applications for Excess Preferential Offering units. 

This means that in total, only 64.7% of the total number of units offered under the preferential offering were subscribed for.

This would include 29.6 million units that CapitaLand Ascott Trust’s sponsor - The Ascott, Somerset Capital, Carmel Plus, CapitaLand Ascott Business Trust Management have taken up. 

Following the preferential offering, their combined stake will be about 28.25% of the total units of CapitaLand Ascott Trust.

The joint lead managers, bookrunners and underwriters Citigroup, DBS and UOB have agreed to subscribe for the remaining units that were not subscribed for. 

#2 – The rights and placement proceeds of S$300m will be used for acquisition, renovation and extension of existing assets and for debt repayment

Despite the under-subscription of the CapitaLand Ascott Trust preferential offering by unitholders, the preferential offering is still expected to raise gross proceeds of approximately S$103.1 million. 

Together with the gross proceeds of approximately S$200.0 million raised from the Private Placement, gross proceeds of a total of approximately S$303.1 million have been raised from the Equity Fund Raising.

About S$170m will be used to partially fund the proposed acquisitions of two hotels in London, the Cavendish London and Temple Bar Hotel, and Ascott Kuningan in Jakarta. 

Another S$83m will go towards financing the proposed extension and renovation of Novotel Sydney Central, and S$20m to pay for the proposed renovation of Citadines Holborn-Covent Garden London. 

A further S$21m is slated for debt repayment, with the balance S$6m to pay the fees incurred in this fund-raising exercise.

#3 – Trading of new units will commence on 4 September 2023 (Monday)

As 1 September 2023 has been declared a public holiday in Singapore, the new CapitaLand Ascott Trust units will commence trading at 9am on 4 September 2023. 

CapitaLand Ascott Trust will be paying a distribution of between 0.664 and 0.724 cents per unit (advance distribution) on 11 October 2023.

However, holders of the Preferential Offering units will not be entitled to the Advanced Distribution and the 1H2023 Distribution.

What would Beansprout do?

CapitaLand Ascott Trust’s share price has fallen by about 12% following the announcement of the preferential offering. 

During the preferential offering subscription period from 16 August to 24 August, CapitaLand’s Ascott Trust’s share price was trading below the preferential offering price of S$1.025 on most days. 

This might explain the low take-up for the preferential offering, as investors may have decided to purchase additional units from the market instead. 

With the under-subscription of the preferential offering and a sizable portion taken up by joint lead managers, bookrunners and underwriters, there might be a potential overhang on the share price of CapitaLand Ascott Trust. 

As we explained to the Beansprout community, this is because there might be more sellers of CapitaLand Ascott Trust’s units in the future when the underwriters decide to sell the units.

This might prevent the share price of CapitaLand Ascott Trust from doing well in the near term.

For investors who are looking to get exposure to hospitality REITs, check out Beansprout’s REIT tool to compare CapitaLand Ascott Trust with other hospitality REITs and choose the best REIT for your portfolio.