Goodman plans to place A$500 million 10% perpetual exchangeables

By Angela McDaniels

Tacoma, Wash., Aug. 6 - Goodman Funds Management Ltd. plans to issue A$500 million of 10% perpetual subordinated unsecured securities exchangeable into ordinary stapled securities of Goodman Ltd., according to a company notice filed with the Australian Securities Exchange.

The exchangeables will be issued to a wholly owned subsidiary of China Investment Corp. in three tranches:

• Tranche 1 will total A$225 million. These securities will become exchangeable on Oct. 31 at an exchange price of A$0.43;

• Tranche 2 will total A$150 million. These securities will become exchangeable on June 30, 2010 at an exchange price of A$0.44;

• Tranche 3 will total A$125 million. These securities will become exchangeable on Dec. 31, 2010 at an exchange price of A$0.45.

Exchanges are allowed prior to these dates in limited circumstances, including if a change of control occurs before Dec. 31, 2010. A change of control occurs if a person gains 20% or more of the company's stapled securities.

The 10% distributions are non-cumulative and will step up to 11% on Jan. 1, 2012 if the securities have not been exchanged.

The company can make the distributions in the form of stapled securities. If it does so, the stapled securities will be issued at a 2.5% discount to the 15-day volume-weighted average price.

After June 30, 2010, the distributions can be made in cash only if the group's EBITDA to interest expense ratio is at least 2.5 times and if its net liabilities to net tangible assets ratio is 55% or less.

The exchangeables are callable beginning Dec. 31, 2010 for tranche 1, Dec. 31, 2011 for tranche 2 and June 30, 2012 for tranche 3 if the closing price of stapled securities is more than 125% of the applicable exchange price for 20 out of 30 consecutive trading days.

The settlement date is expected to fall between Sept. 30 and Oct. 16, subject to approval from holders of the stapled securities and the Foreign Investment Review Board, the completion of a placement of stapled securities and amendments to the group's debt, among other conditions.

Goodman owns, develops and manages industrial property and business spaces. The group is based in Sydney, Australia.

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