Singapore retailer Metro Holdings Ltd has accepted Suntec Real Estate Investment Trust Ltd's offer of S$86.7 million ($53 million) of its bonds in a top Singapore shopping mall, sources close to the deal said on Friday. The move potentially allows Suntec to block German insurer Ergo's plan to form its own Singapore-listed real estate investment trust (REIT) from its two prime shopping malls in the city-state worth S$1.3 billion.
Metro and an Ergo-led consortium together own 27 percent of one of the two shopping malls, Ngee Ann City, located along Singapore's Orchard Road. The Ergo consortium owns the neighbouring Wisma Atria shopping complex.
Suntec, a trust based on a shopping and office complex partly owned by Hong Kong tycoon Li Ka-Shing, on Tuesday made the unsolicited offer to buy Metro's junior bonds, representing about 8 percent of Ngee Ann City.
Metro's acceptance of the offer boosts Suntec's chances of succeeding in its nearly S$1.3 billion bid for stakes in Ngee Ann City and next door Wisma Atria.
"We are at the door now and Suntec is at the table for these properties," said a person familiar with Suntec.
Ergo holds about 18 percent in the two properties while the larger investors in the properties are fellow German insurer Provinzial Rheinland and private equity group Crescent Global Capital Management.
Both malls were securitised in 2003, with Metro holding a third of the bonds in Ngee Ann City.
With ownership of the bonds, Suntec can block the redemption of the bonds held by Ngee Ann's other investors.
"They need to unwind their securitisation for the IPO (initial public offering)," said the source.
For redemption of the bonds to succeed, 75 percent of the bondholders have to agree. Metro's share amounts to 30 percent with Ergo investors holding the balance.
Ergo has first right of refusal over Metro's bonds and has up to 12 days to match Suntec's offer.
Ergo's parent and the world's largest reinsurer, Munich Re, has been working hard to return Ergo to profit in 2004 after heavy losses in 2003 due to huge writedowns as a result of weak stock markets.
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