Saizen Reit has proposed a renounceable non-underwritten rights issue with free detachable and transferrable warrants in a bid to raise $44.75 million to pay off loans and fund its operations. The proposed rights issue is for up to 497.2 million new units in the trust at an issue price of nine cents each, on the basis of 11 rights units for every 10 units held, according to Saizen Reit manager Japan Residential Assets Manager (JRAM). The free detachable and transferrable three-year warrant that comes with every rights share can be exercised at the same price. This means Saizen Reit will receive an additional $44.75 million if all 497.2 million warrants are exercised.

In a regulatory filing on Wednesday, JRAM said that the rights issue price of nine cents represents a discount of 30.8 per cent to Saizen Reit's last-traded price of 13 cents on Wednesday. The company plans to use the proceeds from the rights-cum-warrants issue to repay loans and for 'general operational purposes'. 'While operations of Saizen Reit have been stable, reflecting the underlying strength and resilience of its residential portfolio, lenders generally favour lower leverage under the current credit environment,' said Chang Sean Pey, chief executive officer of the manager. Saizen Reit has 5.28 billion yen (S$82.8 million) in loans due in April this year, but said that it has sufficient cash to repay the amount.

However, the trust has another 13.4 billion yen in loans that are set to mature in November and December. Nine sets of shareholders have given irrevocable undertakings to subscribe for their respective rights-cum-warrants entitlements and mop up any rights shares that remain unsubscribed. These include Argyle Street Management, which owns 11.5 per cent of Saizen Reit, and JRAM directors Arnold Ip, Chang Sean Pey, Raymond Wong and Yeh V-Nee. Non-shareholders Amherst Holdings Equal Chances have made similar commitments.