First REIT hedges 95% of Siloam hospital sale proceeds

Total hedging now covers $348.06m (IDR4.85t) of the sale price.

First REIT has hedged about 95% of the rupiah proceeds from its planned Siloam hospital asset sale as part of its exit from Indonesia.

The trust entered a further deal-contingent non-deliverable foreign exchange forward transaction for $71.6m (IDR1t), according to a bourse filing by its manager, First REIT Management Limited.

The additional hedge represents 19.5% of the Siloam sale price, which stands at $364.9m (IDR5.1t), subject to completion adjustments.

The latest arrangement brings total hedging cover to $348.06m (IDR4.85t), or approximately 95% of the Siloam consideration.

The hedging relates to the sale of eight Indonesian hospital assets to Siloam, alongside three non-core divestments worth about $471.5m in total.

The manager said the planned exit would reduce its exposure to rupiah volatility, which has weighed on Singapore-dollar returns despite higher Indonesia rental income in rupiah terms.

It also cited ageing assets, future capital expenditure requirements, rental arrears recovery, and a plan to redeploy capital into developed markets as reasons for the divestments.

First REIT has also secured a put option for Siloam to purchase its remaining six hospital assets in Indonesia. The put option carries a purchase consideration of about $294.8m.

If the hospital and non-core sales and the potential put option divestments are completed, the trust would fully divest its properties in Indonesia, the manager said.

Proceeds are expected to be used to repay CGIF bonds, a standby letter of credit and syndicated loan facilities, as well as for general corporate and working capital requirements.

The transaction is also expected to support a $9.7m special distribution, pro-forma annual interest cost savings of $18.8m, and reduce pro-forma gearing to 16.7%.

The sales are subject to unitholder approval at an extraordinary general meeting scheduled for 23 June.

$1 = IDR13974.58