CAIRO: Egypt s Palm Hills Development plans to raise as much as LE 2.17 billion in new funds as it prepares to speed up construction spending, an official said on Tuesday. Palm Hills, which targets higher-end buyers, has five real estate developments under way in the western edge of Cairo, four in its eastern edge and one on Egypt s North Coast, Investment Relations Manager Sara El-Gawahergy said. Egypt s property market has continued to burgeon this year despite a slowdown elsewhere in the region and the property crunch in Dubai. We are targeting to speed up construction heavily in 2010 in all of the projects that we are currently developing, plus three additional projects that we will start in 2010, Gawahergy said. We see a unique opportunity to increase the pace of our build-out while capitalizing on the currently low price of key construction materials, she added. The funds comprise LE 698.9 million in a rights issue, up to LE 1 billion in bonds and LE 467 million in a syndicated loan, Gawahergy told Reuters. The rights issue would raise the company s capital to LE 2.01 billion. Palm Hills Development announced Monday that it intends to issue rights shares at a face value of LE 2 per share at a ratio of 1:2 shares. In a note to investors, HC Brokerage said, "Given that the issue price is at more than a 75 percent discount to current market price, we view it as an alternative to a bonus issue rather than a reflection of the company's valuation. The raised capital of LE 700 million will improve the company's liquidity position and help finance upcoming land repayments of LE 722 million, HC said; it will also improve the company's gearing potential for the hotel business, which it plans to fund through a mixed capital structure. A five-year syndicated loan, lead managed by Commercial International Bank, should be signed by the end of this month, Gawahergy said. The board of directors on Sunday approved the sale of up to LE 1 billion in bonds, she added. The drawdown of the loan will be tied to progress in construction on specific projects, while the company would be able free to direct the proceeds of the bonds and equity to other projects, Gawahergy said. The funds leave us in an extremely healthy cash position and cover our needs for the coming two years , she added. "Based on our current assumptions, we derive a post-rights target price of LE 7 per share, the firm said, maintaining a 'hold' recommendation. "Considering the deep discount, the rights are likely to prove value accretive, in our opinion as it will strengthen PHD's liquidity position, easing land repayments and clearing up more space for financing the hotel business resulting in long-term value creation. -Reuters
