By Michelle Tay

CAPITALAND, South-east Asia's biggest developer, is turning to its own shareholders to raise $1.84 billion, after announcing an 88.4 per cent slump in fourth-quarter net profits.

The company will offer eligible shareholders the chance to buy one share for every two held at $1.30 - a steep 45 per cent discount on its last traded price.

The proceeds will enhance the group's financial flexibility, allowing it to pursue acquisitions and other investment opportunities, the group said in a statement.

Amid tight credit markets brought about by the global financial crisis, a growing number of companies in Singapore have turned to rights issues as an alternative way to raise funds.

CapitaLand, which has its main operations in Singapore, China and Australia, posted a net profit of $78 million for the quarter ended Dec 31, down from $675 million the same period a year earlier.

Revenue for the quarter dropped 46.9 per cent to $703.7 million.

Full-year net profit dropped 54 per cent to $1.26 billion, on a 27.4 per cent fall in revenue to $2.75 billion.

CapitaLand chief executive officer Liew Mun Leong said the group is raising the capital 'from a position of financial and business strength' as it posted 'very satisfactory' profits for the year despite challenging real estate markets globally.

The company currently holds $4.2billion in cash. With the extra funds, chief financial officer Olivier Lim said: 'We will have greater financial capacity to pursue opportunities that we think will unfold, given the market situation.'

As to what opportunities these may be, Mr Liew said: 'Let me just say that there will be distressed assets and companies that may run into walls...Obviously in bad times the number of opportunities will increase.'

He added: 'A stronger balance sheet will allow us to...be well-positioned for any mergers and acquisitions opportunities that might arise.'

Already, CapitaLand is re-prioritising its existing projects amid slumping home sales, such as Farrer Court - a residential site it bought in 2007, said Mr Lim.

Although it has signed on renowned British-Iraqi architect Zaha Hadid to design the new condominium development, construction will not start until the group is confident of a good take-up rate, he added.

The rights issue will be fully underwritten in equal thirds by DBS Bank, JP Morgan and Merrill Lynch. In addition, Temasek Holdings, which already has a 39.68 per cent stake in CapitaLand, will sub-underwrite up to another 39.68 per cent of the rights issue.

Trading of the rights issue shares is expected to commence on March 23.

Separately, CapitaMall Trust (CMT), a shopping mall real estate investment trust managed by CapitaLand, said it would raise $1.23 billion via a nine-for-10 rights issue at 82 cents a unit.

The price is a discount of about 43.4 per cent on last Friday's closing price, and the rights issue's underwriters are DBS and JP Morgan.

CMT aims to use the proceeds from the rights issue mainly to repay debt totalling $956.2 million this year.

The balance of the net proceeds will be used to pay for committed asset enhancement initiatives, as well as general corporate and working capital purposes.

Following the rights issue, CMT also expects to further strengthen its balance sheet and lower its gearing - that is, the ratio of borrowings to assets - from 43.2 per cent as of Dec 31, to 29.1 per cent.

'In addition, the rights issue will provide CMT with greater financial flexibility for potential opportunities, which includes asset enhancement at Jurong Entertainment Centre and The Atrium@Orchard,' said Mr Lim Beng Chee, chief executive of CMT Management, which manages CMT.

CapitaLand has committed to subscribe up to 60 per cent of the total size of the rights issue, which will raise its current stake in CMT from 29.7 per cent to 44.1 per cent, he added.

Trading of CMT's rights issue shares is expected to commence on April 3.

This article was first published in The Straits Times on February 10, 2009.