This article is from the Australian Property Journal archive
ASTRO Japan Property Group has partially terminated its $A/Â¥ capital hedge book – reducing the capital amount hedged by approximately 22%.
AJA has also concluded negotiations with its foreign exchange hedge counterparty in relation to the counterparty’s option to terminate the overall hedging arrangements in August 2010.
The key developments are:
ï‚· Hedge counterparty has waived its August 2010 option to terminate.
ï‚· Termination of the capital hedge maturing in 2015, with a principal amount of ¥2.5 billion ($A28.5 million), resulting in a net cash loss to AJA of approximately $A4.8 million.
ï‚· Reduction in the amount of collateral posted with the counterparty from ¥2.4bn to ¥2.0bn ($A22.5 million) following use of cash collateral to fund the cash payment needed to terminate the 2015 hedge. The remaining collateral, originally posted with the counterparty in August 2009, will remain with the counterparty to the extent that any hedging obligations on behalf of AJA remain outstanding.
ï‚· Reduction in the amount of the capital hedge book is expected to reduce income from the capital hedge book by approximately $A1.3m, or 0.25 cents per security, per year.
The counterparty has retained the annual option to terminate from August 2011 at which time the first capital hedge of the portfolio reaches maturity. No further collateral can be called for prior to the next option to terminate in August 2011.
AJA senior advisor said following the successful 5 year senior debt refinancing concluded in March, this is a further step to remove uncertainty concerning AJA’s capital structure.
“This is only the second time since AJA’s inception 5 years ago that we have terminated any $A/ ¥ hedges. Previously, in 2008, the termination of certain hedges resulted in a net cash profit to AJA of approximately $A18.8 million, so whilst a cash loss is never welcome, the $A4.8 million cash loss to AJA from this partial termination has to be seen in that context,” he concluded.
Australian Property Journal
