Scentre Group Successfully Secures $2.3 Billion Debt Deal
Shopping centre giant, Scentre Group has announced that it has priced a US$1.5 billion debt issue in the United States market. The debt issue consists of a US$750 million 5.7-year fixed rate senior guaranteed notes with a coupon of 3.625 per cent. Meanwhile, the remaining amount will comprise of a 10-year fixed rate senior guaranteed notes with a coupon of 4.375 per cent. Collectively, the funds raised from the issuance will be used to repay existing debt such as borrowings under the group’s revolving bank facilities. In its March Quarter update, the group cited that operating performance in January and February 2020 was strong. However, business and operating environment changed tremendously in March as a result of the reactions to the COVID-19 pandemic.
As a whole, total in-store sales were up $656 million or 2.7 per cent for the year. Specifically, the year started off well with total in-store sales climbing 3.6 per cent in January and February 2020. However, March 2020 sales were down 17.6 per cent over the previous corresponding period. In the month of March, categories that were hit the hardest were footwear, fashion, and dining. This is evident in the 41.2, 38.9 and 38.6 per cent decline recorded in Like for Like sales growth, respectively. Meanwhile, discussions are ongoing with retail partners, on a case by case basis, to identify feasible ways Scentre Group can assist with potential cash flow problems, while acknowledging that contractual lease obligations remain in place.
Yet, on a positive note, the group was buoyed by a busy weekend of trading in shopping centres in most parts of Australia. Even before social distancing restrictions around the country were eased, close to 60 per cent of Australian retailers, representing 70 per cent of gross lettable area were open. In accordance with guidelines from the National Cabinet, the group further anticipates most stores to reopen soon in the coming weeks.
The owner of the local Westfield mall empire has also decided to do away with issuing a dividend for the first half of 2020, in a move that could witness other hard-hit mall owners follow suit. Scentre Group attributed the decision to the uncertainty surrounding the pandemic, its duration, timing of operating cash flows and the subsequent economic impact. Yet, Macquarie analysts did not regard the removal of interim distribution to be a surprise as despite the soft operational update, the group’s results were broadly in line with other players within the retail sector.
Prior to this, Scentre Group had already withdrawn guidance for earnings and distributions in March in response to the initial impact of the coronavirus pandemic. While outlook remains uncertain, Scentre Group has witnessed first-hand the benefits of the strategic location of its centres during this period as they are close to where people live and work. Thus, the firm remains confident that its financially healthy position will continue to deliver long term returns to investors.
By Caroline Wong
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