City Developments (CDL) yesterday announced that South Beach Consortium had secured a 2-year S$800m secured term loan financing from a syndicate comprising of DBS Bank, UOB, OCBC, HSBC and Sumitomo Mitsui Banking Corporation. The term loan will be used to refinance part of the S$1.2b bridging loan facility maturing in June 2009 - the remainder of the bridging loan will be refinanced through the issuance of 5-year S$400m secured convertible notes. Investors of the convertible notes include a wholly-owned subsidiary of CDL that will subscribed up to S$195m of the principal and 3 other investors related to the Nan Fung group of companies. Nan Fung is one of the most established property developers in Hong Kong.

Refinancing news came as no surprise as CDL had earlier said that negotiations for refinancing was already in process and with a group of strong investors in the consortium, we did not expect any issue regarding the refinancing. We also view the issuance of convertible note positively as the debt maturity profile of the consortium will improve following the refinancing of the bullet S$1.2b loan with new loans of 2-year and 5-year maturities. CDL had also updated that the consortium is still reviewing and refining its plans for the development. But due to valuation reasons, we maintain our SELL rating on CDL with a fair value of S$5.69.