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Irongate warns on $30 mill bond repayment

Tuesday 1st June 2010

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Irongate Property, the property investor managed by the St Laurence group, said the uncertain economy could compromise its asset sales programme and affect its ability to repay $30 million worh of bonds (not $80 million as reported earlier).

The NZDX-listed bonds are due to mature in six weeks time, on July 15.  

"In the current environment, a level of uncertainty still exists about the ability of the company to repay these bonds in July 2010," said Irongate's general manager, Chris Minty. "In the event that the company fails to make this payment it will be in breach of its trust deed and the trustees will then have ability to carry out enforcement action on behalf of the secured bondholders.

"This could result in the company no longer being a going concern," he said.

The statement was made with Irongate’s full-year results, which showed a $50.5 million loss for the 12 months ended March 31, an improvement on the $87.2 million loss announced last year. The result includes a $34.3 million reduction in the value of Irongate’s properties.

Loan provisioning and write-offs were worth $14 million, and the reduced size of the portfolio shrank rental incomes to $18.8 million, down 34% on the previous year's $28.5 million total.

Balance sheet reduction meant total assets were valued at $240.4 million on March 31, compared with to $372.6 million a year earlier.

"In the year under review Irongate has realised $91.2 million from property sales and has applied the majority of sale proceeds to the repayment of bank debt and secured debenture stock," Minty said. March 2009 bank debt was $144.6 million, or 38.8% of total assets, while at March this year bank debt had reduced to $81.6 million or 34.2% of total assets.

Negotiations to realise a further $50 million were under way, he said.  "Well leased properties continue to generate good levels of interest and we will continue our policy of selling down assets where we can realise good value."

While Irongate's capacity to trade had been unaffected by the receivership of the St Laurence property group, which held a management contract for the Irongate portfolio, "the negative association ... has impacted on certain sales contracts Irongate has had under negotiation," Minty said.

Sales and revaluations decreased the value of the Irongate holdings by 10.3% across the combined investment and development/joint venture property portfolio. The value of the investment portfolio decreased 3.3%, while the development/JV portfolio recorded a 29.3% drop in value.

"We are very pleased, given the current environment, to have successfully sold nearly $120 million of property including joint venture properties," Minty said.  The weighted average lease term (WALT) for remaining properties improved from 3.96 years to 4.66 years, and passing yield on the portfolio rose to 7.57% from 7.03%.

Minty predicted that tight economic conditions would continue for some time, "given the dire financial news coming out of Europe."

The statement of financial position released with its statement to the NZX this evening shows a substantial increase in total liabilities to $104.7 million ($78.5 million a year earlier), largely because of a $16.6 million increase in trade and other payables to $71.4 million.

Loans and advances stood at $15.4 million at March 31, compared with $4.6 million a year earlier, while cash and cash equivalents at $6.7 million were less than a third of the previous balance date total of $21.7 million.

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