City Pacific To Reduce Debt Of First Mortgage By Raising Capital
The Age
Saturday March 1, 2008
CITY Pacific says it plans to raise capital to "reduce the debt" of the $1 billion First Mortgage Fund, fuelling speculation that the Brisbane property group's largest unlisted fund is becoming increasing strapped for cash.
A day after lashing out at the "continuing rumour, innuendo and misinformation" on the state of its finances, City Pacific chief executive Phil Sullivan informed the ASX yesterday that it was seeking to raise capital for the fund. "In light of current market conditions, the directors believe it prudent to reduce the debt of the First Mortgage Fund and have made steps to replace this with institutional investment," Mr Sullivan said in a statement to the market. City Pacific's head of corporate affairs, Greg Price, argued that the fund already had several "institutions on its books" and simply wanted to increase its exposure to institutional investors given its heavy exposure to "mum-and-dad investors". When asked which "institutions" could stump up the cash, Mr Price said: "I don't think Phil (Sullivan) wants to go into that at this stage." The fund has $326 million of loans to property developments due to be repaid by the end of this month. The company confirmed it also had $707 million in loans due to be repaid by the end of the year. City Pacific played down its move in December to deconsolidate two funds from its balance sheet, ensuring it was not liable if they ran out of cash. In contrast to the share price crash that greeted its troubled rival MFS's plans in January to raise capital to cut its debt, City Pacific shares rose 13? to $2.45 after the group reiterated its confidence the fund would recover all of its loans.
© 2008 The Age
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