Dasin Retail Trust’s trustee-manager made two important and sobering announcements on April 24. The first one refers to its aggregate leverage and interest coverage ratio, and the second involves litigation.
According to the latest valuation reports as at Dec 31, 2022 of its seven malls in the Greater Bay Area, valuations declined by 14% y-o-y in RMB and by 23% in Singapore dollars.
The decline in valuation of the portfolio couple with the weakening of the RMB versus the Singapore dollar, US dollar and Hong Kong dollar in which Dasin’s offshore loans are denominated have caused a breach in the gearing ratio which Dasin has to maintain under its offshore facilities (that is, the loan covenants).
“The Trustee-Manager intends to seek a waiver from the lenders of any breach of the financial covenants as part of the discussions with the lenders to restructure and reschedule the group’s debt obligations,” Dasin’s trustee-manager says.
In addition, the general decline in market performance and rental rates, lower passing rent, lower projected growth rate in rent, negative reversion rental rate from some leases contracted in 2022, and an increase in vacancy rates, higher interest expense, derecognition of rental income from two master leases, and the trustee-manager choosing to be paid management fees in cash instead of units, have caused a breach of the interest coverage ratio (ICR) Dasin has to maintain under its offhshore facilities.
A separate issue is the litigation Dasin’s sponsor is involved in. According to the trustee-manager, “there have been at least 113 cases involving the sponsor, of which the sponsor was the plaintiff in 12 cases, the defendant in 94 cases and was involved in some other capacity in 7 cases”.
See also: Changes in ICR, leverage to come into effect immediately, with additional disclosures in March
Disputes ranged from commercial housing reservation contract disputes, construction project / contract disputes, labour remuneration disputes, sales contract disputes, contract disputes, financial loan contract disputes, decoration contract disputes, advertising contract disputes, service contract disputes.
Of the 94 cases, the sponsor was the defendant, 49 cases involve a total sum of more than RMB1.77 billion.
