PLife REIT aims to maintain a strong financial position through prudent and dynamic capital and financial management, to ensure continuous access to funding at optimal cost, maintain stable distributions to Unitholders and achieve a steady net asset value.
PLife REIT has a Baa2 issuer rating, as well as a provisional (P)Baa2 senior unsecured rating to the S$500 million Multicurrency Debt Issuance Programme (the “Debt Issuance Programme”) by Moody’s, with Stable Outlook.
As at 31 March 2021, PLife REIT's gearing remained optimal at 37.8%.
PLife REIT adopts a dynamic and pro-active approach for its liability and liquidity risk management. Our key liability and funding management strategies in support of our regional growth aspirations are:
1) To achieve diversified funding sources at an optimal cost
Diversify our funding sources from a panel of high quality banks, establishing and maintaining our Debt Issuance Programme and other financing sources to attain varied liability tenure, with the end objective of maintaining the most optimal financing cost mix.
2) To enhance the defensiveness of PLife REIT's Balance Sheet strength
Dynamically manage our debt maturity profile to ensure well-spread debt maturities and at the same time, to maintain an optimal capital structure.
Tactical approaches we have adopted in view of the above strategies are:
a) Conscientious effort in lengthening and spreading out the debt maturity period;
b) Cultivating and maintaining a panel of key banks to support our long term growth;
c) Establishing alternative source of fund. In this respect, PLife REIT, through its wholly-owned subsidiary, Parkway Life MTN Pte Ltd (the “MTN Issuer”), put in place a S$500 million Multicurrency Debt Issuance Programme to provide PLife REIT with the flexibility to tap various types of capital market products including issuance of perpetual securities when needed. On 29 March 2021, the Group issued 6-year JPY3.3 billion fixed rate notes and used the proceeds from the new notes issuance to repurchase the JPY3.3 billion fixed rate notes due in 2022 at par (without penalty). As at 31 March 2021, there were three series of outstanding unsecured fixed rate notes amounted to JPY11.8 billion issued under the Debt Issuance Programme, which diversified PLife REIT’s funding sources.
d) Minimising near-term refinancing risk through pre-emptive terming out near-term debts. PLife REIT has refinanced all long-term loan facilities due 2021 with no long-term debt refinancing need till 2022. In addition, with the new notes issuance, about 18% of the loans due in 2022 has been refinanced for another 6 years to 2027.
PLife REIT adopts prudent financial risk management to manage the exposure to interest rate risk and foreign currency risk. Our policy is to hedge at least 50% (up to 100%) of all financial risks.
Interest rate risk is managed on an ongoing basis with the primary objective of limiting the extent to which net interest expenses could be affected by adverse movements in interest rates, by hedging the long term committed borrowings through the use of interest rate hedging financial instruments. For the foreign exchange ("Forex") risk management, we strive to hedge Forex risk on principal which will allow PLife REIT to maintain a stable net asset value, as the Forex fluctuation on foreign asset will offset the Forex fluctuation of the hedging instrument. We also aim to hedge the Forex risk on net overseas income which will provide PLife REIT with stability in distributable income, as PLife REIT will be shielded from exchange rate fluctuation on foreign income.
Tactical approaches in regard to the interest rate and foreign exchange risk management strategies are:
a) 100% hedged our floating rate long term JPY acquisition financing loans for the next few years. This shields PLife REIT from unexpected increase in interest rates, thereby minimising any potential negative impact to its distributions and improving its resiliency against potential interest rate risks. As at 31 March 2021, about 85% of interest rate exposure is hedged.
b) JPY net income hedged till 2Q 2025, thereby enhancing the stability of distributions to Unitholders.
For more details, please refer to PLife REIT's announcements on www.sgx.com.