Last Friday we told the story of the struggles of struggling property group, Mirvac, as it had its shares suspended while it visited shareholders and others looking for money to try and stay in the game.

Monday they told the ASX the trading halt had to remain for another three days while they raised the money. Now the trading halt has been extended while they raise the nominated amount: $500 million, or $200 million more than the original figure floated late last week by underwriters, JPMorgan.

To make matters worse, Mirvac has again cut its earnings guidance for fiscal 2009, which won’t help its attempts to raise the loot. Earnings in 2009 will now be 60% down on what they were in 2008.

In contrast, the AMP revealed it was raising $400 million this morning and won’t have anywhere near the trouble that Mirvac will. Mirvac’s major competitor, Stockland, snapped up $300 million very easily last month and is already doing deals.

It’s all about having the balance sheet strength and reputation, and the necessary transparency these days.

JPMorgan is fully underwriting the deal, so that’s puts the acid on Nakheel of Dubai (14.9%) and the Singapore Government’s GIC Real estate (6%) to pay up to maintain their holdings in the company.

“In these uncertain and volatile markets the board and management have determined that it is prudent to pro-actively undertake a number of initiatives to strengthen Mirvac’s balance sheet, and position the group to flexibly respond to changing market conditions,” managing director Nicholas Collishaw warbled in a statement to the ASX.

The raising comprises a $72 million institutional placement and a $428 million accelerated non-renounceable entitlement offer at a price of 90 cents per stapled security. That’s going to be a tough ask because the securities were at 98.5 cents last Wednesday night before the suspension request went in on Thursday morning. The securities had fallen 28.5% on Wednesday as no doubt some like minds realised, all at once, that Mirvac was looking for money, fast.

The release said the moves were “Capital management Initiatives”, a wonderful example of modern business-speak.

Essentially, that means raise half a bill, reassure the banks, cut costs, reassure the banks, delay development projects, try and sell some developments that you can’t finance, reassure the banks and try and talk them into rolling over a big credit line, cut earnings forecasts for 2009, and promise to be an Australian focused group and never think otherwise, reassure the banks. Or:

A$500 million fully underwritten equity raising to repay debt, comprising an A$72 million institutional placement and A$428 million accelerated non-renounceable entitlement offer at a price of A$0.90 per stapled security;

Pro-actively engaging early with its banks on the roll-over of the approximately A$1.1 billion debt facility due to expire in June 2009 (A$458m drawn at 24 October 2008);

Selectively delaying the commencement of certain development starts, where management considers it prudent to do so, given the current dislocation in real estate and capital markets;

Reducing its non-core investment management offerings, with sales processes in place for several noncore funds; and

Conducting a strategic review of all corporate overheads.

Mirvac said the funds would allow it to reduce gearing to 26.6%, from 32.5%. It will also increase the property group’s available funds to about $1.3 billion, which will be enough to meet its forecast capital commitments over fiscal 2009 and fiscal 2010.

Mirvac has also revised down its earning guidance for fiscal 2009, following the recent deteriorating in financial markets.

Earnings for the year have been revised to 13.4 cents per stapled security, on a post-raising basis, from its guidance in July for 23 to 25 cents.

And the reason for the lowered profit guidance? Well, nothing in the press release, but graphic in a release to investors had the following:

Main drivers for reduced operating earnings guidance include:

removal of profit from sale of inventory – A$50.2m, delay in residential settlements, provision of A$14.0m against mezzanine loan investments, provision of A$14.4m against investment management commitments, elimination of establishment fees – A$3.8m; increased number of securities on issue.

That’s more than $90 million in new writedowns, on top of the $400 million in the July statement. The July statement also said the 2008 earnings were 33.4 cents per security, so the new figure is a drop of 20 cents, or 60%.

Peter Fray

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