The Scentre Group (ASX: SCG) share price is rising today as the company priced US$3 billion worth of hybrid notes. The Scentre share price is trading 2.64% higher to $2.33, whilst also leading the number of securities traded on the S&P/ASX 200 Index (ASX: XJO) at the time of writing.
What Scentre does
Scentre is a leading Australian real estate investment trust (REIT). The retail property group owns and operates the well-known Westfield properties across Australia and New Zealand. These properties are some of the most highly regarded retail assets in the region and enjoy hundreds of millions of customer visits each year.
As a result of the COVID-19 pandemic the Scentre share price has seen a sharp decline so far this year, falling a huge 40%. This is woeful in comparison to the smaller 11% drop in the All Ordinaries Index (ASX: XAO) index.
Why is the Scentre share price rising today?
The Scentre share price is rising today as the company announced that they have priced US$3 billion of subordinated hybrid notes in the US market. The hybrid note issue comprises:
- US$1.5 billion 60-year, non-call 6-year subordinated notes with a coupon of 4.75%, and
- US$1.5 billion 60-year, non-call 10-year subordinated notes with a coupon of 5.125%
This is the group’s inaugural issuance of hybrid notes, which diversify its sources of capital and are expected to be a long-term feature of Scentre’s funding moving forward. As a result, Scentre now has sufficient long-term liquidity to cover all debt maturities to early 2024. Liquidity is important in today’s uncertain times and thus the news is likely driving the Scentre share price higher.
Following the issuance, Scentre will reduce its indebtedness including borrowings under the its revolving bank facilities. Scentre will aim to make distribution in early 2021 from surplus net operating cash flows.
What now for the Scentre share price?
Scentre shareholders will be pleased with the news that regional Victoria is set to emerge from lockdown. Furthermore, as Australia and New Zealand continue to control the pandemic, the Scentre share price continues to trade at a very cheap price. In saying that, ASX shares don’t fall for no reason and investors will be expecting lower future earnings as the pandemic has hit shopping centres hard.