Pure-play data centre REIT in Keppel DC REIT (SGX:AJBU) will be holding its extraordinary general meeting (EGM) on Thursday, 02 December 2021, at 10.30am to seek unitholder’s approval on the following 2 resolutions:

Resolution 1: The Proposed NetCo Bonds and Preference Shares Investment, as an Interested Person Transaction (Ordinary Resolution)

Resolution 2: The Proposed Fee Supplement (Extraordinary Resolution)

In this post, I will attempt to try to share a bit on what the 2 resolutions are about (in as layman an explanation as I can), along with details on how you can sign up to attend its upcoming EGM, and submit relevant questions about the proposed transaction to the REIT’s management (if you are a unitholder):

Resolution 1: The Proposed NetCo Bonds and Preference Shares Investment, as an Interested Person Transaction (Ordinary Resolution)

  • NetCo was established by M1 to own its mobile, fixed, and fibre assets (but it excludes the 5G standalone assets which are jointly owned by the company and another party, which cannot be transferred.)
  • Following the approval of the proposed transaction, where Keppel DC REIT will subscribe to 100% of the bonds (amounting to S$88.7m), as well as 100% of the preference shares issued (amounting to S$1.0m), NetCo will then be treated as a JV of the REIT (for accounting purposes.)
  • In return for the subscription, Keppel DC REIT will receive $11.0m per annum (comprising of both principal and interest), payable semi-annually, for the next 15 years from the date of the issuance of the bonds.
  • The REIT will be funding the acquisition (amounting to S$92.4m in total – consisting of $89.7m for the bonds, $0.9m for acquisition fee, and $1.8m of professional and other fees and expenses) through external bank borrowings, as well as from the remaining cash proceeds (after debt repayment) of approximately $15.1m from the divestment of iseek Data Centre.
  • Post-acquisition, its aggregate leverage will be increased from 36.7% pre-acquisition to 38.0% post-acquisition, and distribution per unit will increase from 9.17 cents/unit pre-acquisition to 9.519 cents/unit post-acquisition (an increase by 3.8%.) Its assets under management will also be increased by 2.8% to $3.3b.
  • According to the circular, the investment in the NetCo bonds and preference shares is in-line with the REIT’s mandate to invest in assets necessary to support the digital economy. Also, the proposed transaction will provide unitholders with a long-term stable cash flow for 15 years (which is very much in-line with the REIT’s objective to provide its unitholders with regular and stable distributions), and at the same time, without having to assume any operational management risks.
  • Also, post-transaction, the NetCo Preference Shares will entitle Keppel DC REIT to have 50.0% representation on the board of directors of NetCo, allowing the REIT to have oversight on the performance of the company, and early line of sight of any issues that may pose any credit risks.
  • NetCo will use the proceeds from the issuance of the bonds (of $88.7m), and external borrowings of up to $493.0m to finance the acquisition of the mobile, fixed, and fibre assets.

Resolution 2: The Proposed Fee Supplement (Extraordinary Resolution)

  • The resolution is to facilitate the payment of a one-off acquisition fee payable to the Manager (amounting to $2.7m – which consists of $0.9m for acquisition fee, as well as $1.8m of professional and other fees and expenses) for the proposed transaction set out in the previous resolution.
  • However, the amount will be reimbursed by NetCo.
  • When the NetCo bonds mature, as with other bond investments, it will cease to exist, and no divestment fee will be payable to the Manager upon maturity.

Details of the EGM

Keppel DC REIT will be holding an EGM online to seek unitholders’ approval for the 2 resolutions above on Thursday, 02 December 2021, at 10.30am.

If you are a unitholder of the data centre REIT, you can sign up to attend its virtual EGM, along with any questions relating to the proposed transaction here – do note that the deadline to do so will be on 29 November 2021, at 10.30am.

I will be attending the REIT’s upcoming EGM as a unitholder, and as always, I will be compiling a summary of the meeting in due course – so for those of you who are interested in reading about it, do stay tuned!

Related Documents

Disclaimer: At the time of writing, I am a unitholder of Keppel DC REIT.

 

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