City Pacific Seeks Support From Institutional Investors
Sydney Morning Herald
Saturday March 1, 2008
CITY PACIFIC has fuelled suspicions that its largest unlisted fund is becoming strapped for cash, after it said it planned to raise funds to "reduce the debt" of the $1 billion First Mortgage Fund.
One day after lashing out in a letter to shareholders at the "continuing rumour, innuendo and misinformation", the chief executive of the Brisbane property group, Phil Sullivan, told the Australian Securities Exchange yesterday it was seeking to raise fresh 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. 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 provided its strongest hint yet that the fund had been drawing down heavily on a Commonwealth Bank debt facility. The facility was increased by $90 million to $240 million in September. City Pacific said it had $50 million of undrawn money on December 31, meaning it drew a further $40 million of debt in the last three months of 2007. But, unlike the share price crash that greeted its troubled rival MFS's plans to raise capital to cut its debt in January, City Pacific shares rose 13c to $2.45 after the group reiterated its confidence the fund would recover all its loans.In response to a report in yesterday's Herald, the company confirmed it also had $707 million in loans due to be repaid by the end of this year.The company also played down its move in December to deconsolidate two of its funds from its balance sheet, ensuring it was not liable if the funds ran out of cash. It said the "accounting treatment is standard industry practice". There was no reference to a winding-up order - also reported in yesterday's Herald - against the company's $650 million Martha Cove development in Victoria, which owes the Mortgage Fund $62 million. Raptis Group, City Pacific's partner in a development on the Gold Coast, which has been delayed more than six weeks, declined to comment.The founder of Raptis, Jim Raptis. said: "City Pacific are responsible for the financing of that project. I have nothing more to add to that."
© 2008 Sydney Morning Herald
