Australia’s Vicinity Plans to Raise $932 Million

A leading Australian shopping mall manager and real estate investment trust group, Vicinity Centres (Vicinity) announced plans on Monday, June 1, 2020, to raise its funding and prevent from shrinking cash reserve impacted by the highly contagious disease COVID-19 outbreak. Amid the virus outbreak, Australia companies were the largest among companies that raised capital from investors despite the country has a relatively low number of virus-infected cases and the death toll from it.

Vicinity’s Plan to Raise Funding

The Australian real estate group declared on Monday that it has canceled dividends to its shareholders due to the shrinking of cash reserve impacted by the virus outbreak and shared plans to raise A$1.4 billion ($932 million), underscoring pressure on the retail sector from the new coronavirus outbreak.

The group, which operates nearly 70 shopping mall across Australia, also would ask corporate investors for A$1.2 billion and retail shareholders for another A$200 million to ensure “flexibility to respond to the uncertainty caused by COVID-19 and the evolving retail landscape”, as explained by the Chief Executive Officer (CEO) of the group, Grant Kelley.

Despite Australia has seen relatively low virus cases with about 7,200 infections and 103 deaths by Monday, several brick-and-mortar retailers were among the worst affected companies with giants including Vicinity were forced to renegotiate its profit sharing and restructuring its financial capital.

Vicinity’s Value Declined

Kelley, the Vicinity CEO, said the company would reduce the value of its assets by up to 13% or A$2.1 billion this month amid “uncertain” over the company’s negotiating with tenants, and stabilization of rent income. Meanwhile, the manager of Westfield-branded malls in Australia, Scentre Group raised $1.5 billion on the United States bond market, while property developer Lendlease Group, which manages retail assets, raised A$1.21 billion in new shares last month.

The company reported that foot traffic had improved since April during the national lockdown was still imposed but with restrictions lifting, traffic had climbed up 74% of its year-earlier level compared to 50% in April.

Concerning the latest move for fundraising, Rating agency Moody’s said Vicinity’s measures would help the company but “downside risk remains as the retail sector, which was already facing structural and cyclical headwinds, will likely see earnings and demand decline amid weak consumer sentiment, high unemployment, and rising e-commerce penetration”.

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