Hot stock: First Reit plunges 32% after announcing rights issue

UNITS of First Real Estate Investment Trust (First Reit) sank on Monday after its manager proposed a rights issue with an indicative issue price of 20 Singapore cents per unit.

As at the midday break, the counter traded at 27.5 cents, down 32.1 per cent or 13 cents from the previous close. It had fallen as much as 33.3 per cent or 13.5 cents to 27 cents earlier in the morning.

Over 29.4 million units worth S$9.4 million changed hands by noon, more than 12 times the usual daily volume of 2.4 million units traded on average in this quarter.

The manager on Monday morning said the renounceable rights issue, to raise gross proceeds of around S$158.2 million, was "critical" for First Reit to meet its debt covenants.

The fundraising exercise will also allow the trust to "avoid an imminent default" of 39.8 per cent of total debt, or about S$196.6 million, due on March 1 next year.

It is proposing to issue some 791.1 million units, representing 98 per cent of the total units in issue as at Dec 23, on a pro rata basis of 98 rights units for every 100 existing units.

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The issue price of 20 cents apiece is at a 50.6 per cent discount to the closing price of 40.5 cents on Dec 24, and a 33.3 per cent discount to the theoretical ex-rights price of 30 cents, based on the closing price on Dec 24.

Last month, First Reit also announced the proposed restructuring of master lease agreements for the hospitals leased to Lippo Karawaci, its former parent company.