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Manulife US Reit on track to conclude loan talks by year-end sponsor support package &lsquo compelling&rsquo to lenders: CEO
THE manager of (Manulife US Reit) is on track to conclude by year-end its negotiations with banks, following the Reit&rsquo s breaching of the lenders&rsquo unencumbered gearing ratio, said the manager&rsquo s chief executive officer Tripp Gantt.
A key component of this restructuring is the introduction of a sponsor support package, the contents of which are &ldquo compelling&rdquo to all parties at the table, he said as he gave a third-quarter business update on Friday (Nov 3).
He said he could not give away too much on the package for now as the talks with the lenders are &ldquo sensitive and confidential&rdquo , but pointed out that the execution of the package will depend on the lenders&rsquo approval. &ldquo What I can tell you is that we have been in constant non-stop contact with the banks, with the lenders, and our sponsor... working on this negotiation, and we&rsquo re looking forward to having something to share with you here in the coming weeks.&rdquo
He added that the sponsor&rsquo s package, which is intended to address the Reit&rsquo s long-term liquidity needs and to give it more financial flexibility, &ldquo has evolved to something that seems quite agreeable to almost everybody that&rsquo s involved in these negotiations&rdquo , and is something the manager is &ldquo quite pleased with&rdquo .
Manulife US Reit&rsquo s manager first entered into discussions with banks in July, after the Reit breached a financial covenant in some loan agreements. The covenant had set out a condition &ndash that the ratio of consolidated total unencumbered debt to consolidated total unencumbered assets should be not more than 60 per cent. The breach caused all the Reit&rsquo s loans to be reclassified as current liabilities.
The manager reported on Friday that its unencumbered gearing ratio for Q3 now stands at 59.9 per cent, but negotiations with the lenders to waive the breach would have to continue, as lowering the unencumbered gearing ratio does not rectify a breach of the financial covenant. It also highlighted that distribution payment is also part of the ongoing negotiations with the Reit&rsquo s lenders.
Asked if an extraordinary general meeting (EGM) to approve the terms of the restructuring would take place by the end of the year, the manager&rsquo s deputy chief executive Caroline Fong said this would depend on how the talks with the lenders turn out, and whether the documents can be ready in time.
That said, she expressed hope that all proceedings, including the EGM, will be finalised by early in the first quarter of next year, based on the current target for the negotiations with the lenders to conclude by the end of this year. Pointing out that a circular would have to go out before the EGM is held, she quipped: &ldquo You never know, you may have a Christmas present, and we hope we don&rsquo t have to have an analyst and media briefing on Christmas Day.&rdquo
On the potential impact of the loan restructuring on the Reit&rsquo s credit spread, the manager&rsquo s chief financial officer Robert Wong said: &ldquo At the moment, we can&rsquo t share any colour as to what the pricing is going to be, but it&rsquo s not going to be moneylender rates. It&rsquo s measured. I think it&rsquo s (looking to be) a win-win for all &ndash lenders, unitholders and investors.&rdquo
Gantt revealed that the manager is beginning to look at selling its non-core assets &ndash those properties that do not come with a &ldquo strong, compelling, future-return potential&rdquo &ndash to reduce the Reit&rsquo s indebtedness and fund capital expenses (capex). A disposition mandate would give the Reit the flexibility to be competitive when the US office market opens up and turns conducive for a sale, he said.
As at Sep 30, the interest-rate coverage of its debt profile stood at 2.4 times, down from 3.4 times in the corresponding period last year. With its interest-rate coverage ratio below 2.5 times, the Reit is not allowed to increase its leverage to beyond the prevailing 45 per cent limit, instead of a 50 per cent limit.
Meanwhile, its aggregated leverage ratio, or gearing, declined slightly on the quarter to 56 per cent, but up 13.5 percentage points from 42.5 per cent by the end of last September.
The manager noted that based on the Monetary Authority of Singapore&rsquo s Code on Collective Investment Schemes, the aggregate leverage limit is not considered to be breached if it was due to &ldquo circumstances beyond the control of the manager&rdquo .
The manager should not incur any additional borrowings or enter into further deferred payment, if exceeding the gearing limit was led by property fund depreciation, or any redemption units or payments made from the property fund.
The Reit&rsquo s weighted average term of maturity stood at 2.3 years, with 69.2 per cent of loans on fixed rates.
Its portfolio weighted average lease expiry stood at 5.1 years, with its top 10 tenants mainly company headquarters or government agencies.
Regarding a potential rights issue to inject more capital into the troubled Reit, the manager noted that the talks with its lenders must first be finalised for any equity fundraising to be considered.
A year-end portfolio valuation will be done as required, which might register a continued decline in office valuations in the US, it added.
&ldquo Under the International Financial Reporting Standards, we have to carefully assess the appropriateness of the fair values of investment properties reported in our balance sheet.&rdquo
As at Jun 30, the cash balance stood at US$133 million, which the manager expects will allow the Reit to &ldquo continue operating (its) portfolio prudently&rdquo .
&ldquo We have set aside a budget for essential capex for 2023, and have reviewed our 2024 budget to determine what essential capex we can undertake.&rdquo
Units of Manulife US Reit closed 9.4 per cent, or US$0.005 higher, at US$0.058 on Friday.
https://links.sgx.com/FileOpen/Manulife%20US%20REIT%203Q%202023%20Operational%20Updates.ashx?App=Announcement& FileID=776940
A key component of this restructuring is the introduction of a sponsor support package, the contents of which are &ldquo compelling&rdquo to all parties at the table, he said as he gave a third-quarter business update on Friday (Nov 3).
He said he could not give away too much on the package for now as the talks with the lenders are &ldquo sensitive and confidential&rdquo , but pointed out that the execution of the package will depend on the lenders&rsquo approval. &ldquo What I can tell you is that we have been in constant non-stop contact with the banks, with the lenders, and our sponsor... working on this negotiation, and we&rsquo re looking forward to having something to share with you here in the coming weeks.&rdquo
Manulife US Reit&rsquo s manager first entered into discussions with banks in July, after the Reit breached a financial covenant in some loan agreements. The covenant had set out a condition &ndash that the ratio of consolidated total unencumbered debt to consolidated total unencumbered assets should be not more than 60 per cent. The breach caused all the Reit&rsquo s loans to be reclassified as current liabilities.
The manager reported on Friday that its unencumbered gearing ratio for Q3 now stands at 59.9 per cent, but negotiations with the lenders to waive the breach would have to continue, as lowering the unencumbered gearing ratio does not rectify a breach of the financial covenant. It also highlighted that distribution payment is also part of the ongoing negotiations with the Reit&rsquo s lenders.
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That said, she expressed hope that all proceedings, including the EGM, will be finalised by early in the first quarter of next year, based on the current target for the negotiations with the lenders to conclude by the end of this year. Pointing out that a circular would have to go out before the EGM is held, she quipped: &ldquo You never know, you may have a Christmas present, and we hope we don&rsquo t have to have an analyst and media briefing on Christmas Day.&rdquo
On the potential impact of the loan restructuring on the Reit&rsquo s credit spread, the manager&rsquo s chief financial officer Robert Wong said: &ldquo At the moment, we can&rsquo t share any colour as to what the pricing is going to be, but it&rsquo s not going to be moneylender rates. It&rsquo s measured. I think it&rsquo s (looking to be) a win-win for all &ndash lenders, unitholders and investors.&rdquo
Gantt revealed that the manager is beginning to look at selling its non-core assets &ndash those properties that do not come with a &ldquo strong, compelling, future-return potential&rdquo &ndash to reduce the Reit&rsquo s indebtedness and fund capital expenses (capex). A disposition mandate would give the Reit the flexibility to be competitive when the US office market opens up and turns conducive for a sale, he said.
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Manulife US Reit posted an occupancy rate of 84.7 per cent as at the end of September, 3.4 percentage points lower than the 88.1 per cent for the same period last year.As at Sep 30, the interest-rate coverage of its debt profile stood at 2.4 times, down from 3.4 times in the corresponding period last year. With its interest-rate coverage ratio below 2.5 times, the Reit is not allowed to increase its leverage to beyond the prevailing 45 per cent limit, instead of a 50 per cent limit.
Meanwhile, its aggregated leverage ratio, or gearing, declined slightly on the quarter to 56 per cent, but up 13.5 percentage points from 42.5 per cent by the end of last September.
The manager noted that based on the Monetary Authority of Singapore&rsquo s Code on Collective Investment Schemes, the aggregate leverage limit is not considered to be breached if it was due to &ldquo circumstances beyond the control of the manager&rdquo .
The manager should not incur any additional borrowings or enter into further deferred payment, if exceeding the gearing limit was led by property fund depreciation, or any redemption units or payments made from the property fund.
The Reit&rsquo s weighted average term of maturity stood at 2.3 years, with 69.2 per cent of loans on fixed rates.
Its portfolio weighted average lease expiry stood at 5.1 years, with its top 10 tenants mainly company headquarters or government agencies.
Regarding a potential rights issue to inject more capital into the troubled Reit, the manager noted that the talks with its lenders must first be finalised for any equity fundraising to be considered.
A year-end portfolio valuation will be done as required, which might register a continued decline in office valuations in the US, it added.
&ldquo Under the International Financial Reporting Standards, we have to carefully assess the appropriateness of the fair values of investment properties reported in our balance sheet.&rdquo
As at Jun 30, the cash balance stood at US$133 million, which the manager expects will allow the Reit to &ldquo continue operating (its) portfolio prudently&rdquo .
&ldquo We have set aside a budget for essential capex for 2023, and have reviewed our 2024 budget to determine what essential capex we can undertake.&rdquo
Units of Manulife US Reit closed 9.4 per cent, or US$0.005 higher, at US$0.058 on Friday.
https://links.sgx.com/FileOpen/Manulife%20US%20REIT%203Q%202023%20Operational%20Updates.ashx?App=Announcement& FileID=776940
chartistkao1 ( Date: 06-Nov-2023 15:18) Posted:
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https://www.channelnewsasia.com/singapore/hawker-centre-coffee-shop-food-court-clear-table-tray-fine-1365176
https://www.nea.gov.sg/our-services/waste-management/disposable-carrier-bag-charge
https://sso.agc.gov.sg/SL/RTA1961-R24?DocDate=20211231
https://www.youtube.com/watch?v=X0sevSWDOE8
chartistkao1 ( Date: 06-Nov-2023 14:37) Posted:
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japan throw toxis into the ocean and US throw toxic into global markets vie their financial manipulation
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One of the weirdest aspects of the global financial system is that the entire edifice rests precariously on a shrivelled market dominated by obscure US mortgage co-operatives and a motley group of foreign banks. This is an entirely fair description of today&rsquo s federal funds market, which is what the US central bank uses to set interest rates for the American economy &mdash and, by extension, the entire world. But don&rsquo t take our word for it &mdash it&rsquo s basically what New York Federal Reserve said in a recent report on the market: The fed funds market has changed dramatically since 2008&thinsp .&thinsp .&thinsp . Daily volume in the fed funds market has decreased substantially and market dynamics have evolved to capture arbitrage activity between FHLBs and branches of foreign banks. The FHLBs mentioned are the Federal Home Loan Banks, basically US government-sponsored co-operatives of mortgage lenders that use their implicit state backstop to get cheap funding and extend the benefits on to their members. They&rsquo ve always been big lenders in the fed funds market, but these days their domination is near-total. FHLBs Are the Main Lenders in the Fed Funds Market. NB the chart shows quarterly average federal funds volume by lender type from the fourth quarter of 2015 through the third quarter of 2023. © Federal Reserve Form FR 2420, Report of Selected Money Market Rates authors&rsquo calculations. The foreign banks that do most of the borrowing are actually the US branches of international banks. But in the case of the fed funds market, we&rsquo re not talking about HSBC, Deutsche Bank, Barclays or BNP Paribas. No, this is an odd collection of foreign financial institutions including the likes of Sweden&rsquo s SEB, Mizuho in Japan and China&rsquo s ICBC. The biggest, by far, is Taiwan&rsquo s Mega Bank. Again, these foreign banking organisations (FBOs) have always been big fed funds borrowers (we&rsquo ll get to why later), but lately their activity has hit eye-catching levels. FBO Branches Are the Main Borrowers in the Fed Funds Market. NB the chart shows quarterly average federal funds volume by borrower type from the fourth quarter of 2015 through the third quarter of 2023. © Federal Reserve Form FR 2420, Report of Selected Money Market Rates authors&rsquo calculations. At the same time, actual trading volumes in this stratospherically systemic market have atrophied dramatically. Before 2008, the average daily trading volumes were about $150-175bn, or equal to about 2 per cent of the assets of the entire American commercial banking industry. That fell to just $60-80bn in the 2010s, and even in today&rsquo s torrid rate environment it has only climbed back to $110bn in 2023 &mdash or about 0.5 per cent of bank assets. If global monetary policy were Lord of the Rings, then the fed funds market would be the One Ring to rule them all. And yet today it is the weird runt of US money markets (repo volumes alone stands at almost $3tn). To understand why the likes of Mega Bank and FHLB Topeka now dominate this vital but emasculated market we need to look at how the US financial plumbing has changed since 2008, and the mechanics of how the Fed actually raises interest rates. Until 2020, US banks had to maintain reserves at the Fed equal to a percentage of their deposits at the end of the day (the reserve requirement*). If they have more than they need they can lend it out to someone who has too little. Before the financial crisis, if the US central bank wanted to increase interest rates it sucked funds out of the fed funds market by selling some of the Treasuries it had tucked away on its balance, and charging the banks&rsquo accounts at the Fed. When it wanted to lower rates it pushed money into the market by buying Treasuries and debiting money to banks&rsquo reserve accounts. These are called &ldquo open market operations&rdquo , and are why the Fed&rsquo s rate-setting committee is called the Federal Open Market Committee &mdash it adjusted the effective overnight interest rate to be close to its target by tweaking how much money was sloshing around in the fed funds market. But then something happened&thinsp .&thinsp .&thinsp .&thinsp Line chart of Excess reserves ($tn) showing To infinity and beyond The Fed&rsquo s 2008-onward QE programmes swamped banks with excess liquidity &mdash with reserves far greater than what the reserve requirement would dictate &mdash neutering the fed funds market&rsquo s traditional role. See that tiny bump in 2001? That was the then-unprecedented liquidity injection the Fed orchestrated after the 9/11 terrorist attack. Nowadays it looks almost quaint. In March 2020 the Fed scrapped the reserve requirement entirely, partly to ease financial conditions but mostly because it was utterly redundant by that point.* That&rsquo s why the data on the chart above only goes up to 2020, after which it was discontinued. To manage the fed funds rate in the era of excess reserves, the central bank introduced several new tools: primarily the IOER, or interest on excess reserves (since 2021 actually interest on reserve balances, or IORB), and the ON-RRP, or overnight reserve repo programme. The IOER/IORB is the rate the Fed pays commercial banks on deposits held with it, which pulls the fed funds rate to the target rate. After all, why lend to another bank at a lower rate than what you can get at the Fed? The ON-RRP helps push it, by the Fed selling Treasuries and agreeing to repurchase them the next day, basically setting an overnight interest rate for itself. These levers have worked pretty well, despite fears that something somewhere would break when the Fed first started raising interest rates back in 2015. As the NY Fed paper notes, there are two main reasons why the FHLBs dominate lending in today&rsquo s fed fund market (accounting for about 90 per cent of the volume): First, FHLBs must hold liquidity portfolios &mdash partly to meet minimum regulatory requirements, but also to satisfy advances to their members. Fed funds are key instruments in such portfolios, along with interest-bearing deposit accounts and other selected short-term investments such as reverse repos. This means that FHLBs turn to the fed funds market to invest excess cash holdings. Second, unlike domestic banks and FBO branches, FHLBs do not earn interest on their balances at the central bank, which creates an incentive for them to lend at rates below the IORB rate. In turn, this incentive to lend at low rates triggers the arbitrage mechanism between fed funds rates and the IORB rate, making it a regular phenomenon rather than an anomaly. And foreign bank branches are the biggest borrowers because their different regulatory treatment allows them to eke out an arbitrage by borrowing at the fed funds rate and reinvesting it in the IORB. Unlike domestic banks, however, most FBO branches are not insured by the Federal Deposit Insurance Corporation (FDIC) after amendments to the International Banking Act disallowed new branches of FBOs from obtaining deposit insurance. This regulatory difference has two important implications for why FBO branches borrow in the fed funds market: First, it limits their access to deposits &mdash the main source of domestic bank funding &mdash making fed funds an important source of their short-term funding. Second, since they do not pay the FDIC assessment fee, most FBO branches face an effective cost of borrowing fed funds that is lower than that of domestic banks. Lower funding costs give FBO branches an advantage over their domestic counterparts in arbitraging fed funds offered at rates below the interest on reserve balances (IORB) rate, as they can effectively earn a larger spread by borrowing fed funds and depositing the borrowed funds at the Fed. Furthermore, differences in regulatory requirements across jurisdictions make engaging in the arbitrage trade less costly and less capital intensive for FBO branches. Specifically, leverage ratios in foreign jurisdictions are often calculated as a period-end snapshot, as opposed to daily or weekly averages in the U.S., which allows FBO branches more flexibility to borrow between reporting dates and simply unwind their positions on month-end or quarter-end dates to maintain higher reported leverage ratios. Regulations and arbitrage rules everything around us, basically. Alphaville still doesn&rsquo t have a good understanding of just why, say, Mega Bank is so hot for this trade. Answers on a postcard (or, better still, in the comments). But as far as monetary plumbing is concerned it &mdash basically works? Here&rsquo s a chart showing the daily fed funds rate staying obediently between the IORB and ON-RRP rate as policymakers jacked up interest rates since 2022. The question of course is what might happen as the Fed keeps shrinking its balance sheet and goes from an era of &ldquo excess reserves&rdquo to &ldquo abundant&rdquo and eventually to &ldquo ample&rdquo (these are terms the central bank itself uses, honest). As the NY Fed paper points out, daily fed funds volumes have climbed sharply lately (even though they are far below pre-2008 levels), and continually shrinking reserves means that fed funds market activity will probably continue to recover. The problem is that no one really knows where excess became abundant, and abundant becomes ample &mdash or, crucially, when ample becomes acutely tight. We might only find out when something goes wrong. And you really don&rsquo t want your monetary plumbing to go wrong. *Tweaked and added some context around the Fed ending reserve requirements in 2020. Sign up to the Emerging Markets: New York AM newsletter, every weekday Copyright The Financial Times Limited 2023. All rights reserved. Late
https://www.youtube.com/watch?v=h_euJPjSFz4
chartistkao1 ( Date: 06-Nov-2023 14:33) Posted:
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high yields leave banks twice bitten, investors thrice shy
4 Oct 2023 &mdash The upward march of Treasury yields has largely wiped out US bond market returns for the year. Now they threaten to crimp US bank earnings.
https://www.youtube.com/watch?v=_T7Mb3hj1Ls
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https://www.ft.com/content/47f66b34-b30e-4365-8421-7b9d3e3fdc13
Get ahead with daily markets updates.Join the FT' s WhatsApp channel The upward march of Treasury yields has largely wiped out US bond market returns for the year. Now they threaten to crimp US bank earnings. The US banking sector was finally starting to enjoy some semblance of stability after turmoil following the collapse of Silicon Valley Bank in March. Deposit outflows have subsided at large banks and reversed at smaller ones, according to Federal Reserve data. But the sharp rise in bond yields threatens to heap fresh pressure on the sector. Investors have been selling bank shares since the Federal Reserve signalled it may keep rates higher for longer. The yield on 30-year US Treasuries, which ended the third quarter with the biggest quarterly jump in more than a decade, hit a 16-year high this week. Both the KBW regional banking index and the broader KBW bank index have fallen about 10 per cent over the past month. They are down 26 per cent since new year. Higher yields on newly issued Treasury bonds will further erode the value of bonds and loans acquired or issued when rates were lower. US banks were sitting on $558bn of unrealised losses in their securities portfolio at the end of June, according to the Federal Deposit Insurance Corporation. A resurgence of unrealised losses in the third quarter could put fresh strain on banks&rsquo balance sheets, forcing lenders to tap the Fed for expensive emergency funding or pay more to keep depositors. The latter have poured vast sums into money market funds. Higher funding costs, combined with slowing loan growth, would in turn put downward pressure on banks&rsquo net interest margins. Analysts are busy cutting their bank earnings forecasts. Wells Fargo has lowered its earnings per share estimates for the sector by 2 per cent this year and 5 per cent next year. Morgan Stanley has cut its forecasts by 3 per cent next year. Investors had imagined successful resolutions of failed lenders marked the end of the sector&rsquo s painful adjustment to higher rates. Think again. If you are a subscriber and would like to receive alerts when Lex articles are published, just click the button &ldquo Add to myFT&rdquo , which appears at the top of this page above the headline. Copyright The Financial Times Limited 2023. All rights reserved. Lat
https://www.ft.com/content/47f66b34-b30e-4365-8421-7b9d3e3fdc13
Get ahead with daily markets updates.Join the FT' s WhatsApp channel The upward march of Treasury yields has largely wiped out US bond market returns for the year. Now they threaten to crimp US bank earnings. The US banking sector was finally starting to enjoy some semblance of stability after turmoil following the collapse of Silicon Valley Bank in March. Deposit outflows have subsided at large banks and reversed at smaller ones, according to Federal Reserve data. But the sharp rise in bond yields threatens to heap fresh pressure on the sector. Investors have been selling bank shares since the Federal Reserve signalled it may keep rates higher for longer. The yield on 30-year US Treasuries, which ended the third quarter with the biggest quarterly jump in more than a decade, hit a 16-year high this week. Both the KBW regional banking index and the broader KBW bank index have fallen about 10 per cent over the past month. They are down 26 per cent since new year. Higher yields on newly issued Treasury bonds will further erode the value of bonds and loans acquired or issued when rates were lower. US banks were sitting on $558bn of unrealised losses in their securities portfolio at the end of June, according to the Federal Deposit Insurance Corporation. A resurgence of unrealised losses in the third quarter could put fresh strain on banks&rsquo balance sheets, forcing lenders to tap the Fed for expensive emergency funding or pay more to keep depositors. The latter have poured vast sums into money market funds. Higher funding costs, combined with slowing loan growth, would in turn put downward pressure on banks&rsquo net interest margins. Analysts are busy cutting their bank earnings forecasts. Wells Fargo has lowered its earnings per share estimates for the sector by 2 per cent this year and 5 per cent next year. Morgan Stanley has cut its forecasts by 3 per cent next year. Investors had imagined successful resolutions of failed lenders marked the end of the sector&rsquo s painful adjustment to higher rates. Think again. If you are a subscriber and would like to receive alerts when Lex articles are published, just click the button &ldquo Add to myFT&rdquo , which appears at the top of this page above the headline. Copyright The Financial Times Limited 2023. All rights reserved. Lat
chartistkao1 ( Date: 06-Nov-2023 14:30) Posted:
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