Covid 19 coronavirus: What business is doing to try to survive the pandemic

In the boardrooms of Sydney and Auckland, executives are meeting to put in place funding schemes in the hope those will see them right for the next cash-strapped six to 12 months.

So far, plans have been announced for about six businesses to get access to more than $4.5 billion - mostly through debt funding, although raising equity may be another option for many firms.

Yesterday, New Zealand's biggest mall owner and a major retailer quietly announced a major new debt facility, following the country's biggest commercial landlord and two other real estate entities putting in new funding lines.

Mall owner Scentre said yesterday it had secured A$3.1b extra borrowing capacity and Kathmandu said it planned to raise about $207m to help see it through the store closures and uncertainty due to the pandemic. Both those announcements were made yesterday.

On March 27, Kiwi Property said it had extended $214m with ANZ, BNZ and Westpac. Two days before, PFI said the pandemic risk had prompted it to secure a new $50m facility from the CBA's New Zealand branch. Also on March 25, Argosy Property got an extra $50m facility from ANZ, BNZ, Hong Kong and Shanghai Bank, CBA and Westpac to "provide additional liquidity".

Cochlear did a A$880m capital raise in Australia late last month.

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Scentre's malls throughout New Zealand are shut, except for essential services like pharmacies and supermarkets. It owns half of the Westfields at Albany, Newmarket, St Lukes, Manukau and Riccarton, with the other half owned by a Singapore government investment fund.

Mark Lister, Craigs Investment Partners' head of private wealth, says all this borrowing and capital raising is just the start. Far more can be expected.

"It's fair to say that many property owners are under increasing pressure at the moment, and in particular those with a high exposure to retail property, so I'm not surprised," he said, referring to all the shut shops and loss of trade.

Lister expects to see many more NZ capital raisings as companies look to shore up balance sheets and give themselves some breathing space.

And he saw it as significant that Scentre announced it had pushed out borrowing capacity by A$3.1b yesterday.

Mark Lister sees a flurry of activity. Photo / John Borren

"The local listed property sector is in good shape, and a few have actually raised capital already in recent times, so in general terms they are well-positioned. I think it is those with retail exposures that are probably most likely to suffer," he said, referring to Scentre and Kathmandu.

Craig Tyson, ANZ's head of Australasian property securities, says one key factor is driving the flurry of activity.

"I think the New Zealand listed property sector balance sheets are fine from a loan to value ratio point of view. It's the interest coverage ratio covenant that is probably more concerning for all landlords given that some tenants may stop paying rent."

So what property companies are doing here and in Australia is to make sure that they have enough liquidity in cash or bank facilities on hand to pay interest costs and debt expires over the next six to 12 months or whatever time it takes for things to return to normal, he said.

"So we are seeing all listed property companies access new bank lines for this purpose, which is prudent. Scentre is just the latest in this regard. It now has enough liquidity to meet all costs and debt expires until the end of 2021," Tyson noted.

Chris Wilkinson of consultants First Retail Group agrees: "This is a prudent move. Businesses that are able to are looking to secure financial headroom at the moment to address immediate needs and potential costs as they lift themselves back into the market. We've seen similar moves from retailers this week including Scentre and Kathmandu and in the UK the big mall operators have been doing the same."

Shane Solly of Harbour Asset Management said Scentre was some way behind the others but he too was watching the trend with interest.

But for Lister, simply going to the bank or shareholders, cap in hand, might not be enough for some to survive.

Chris Wilkinson says the moves are prudent. Photo / Mark Mitchell

"I do worry more about all of the property syndicates around the country that some less sophisticated and income-focused investors have flocked to. These are much higher risk than the listed sector, especially in an environment like this," Lister said.

The syndicates are usually smaller, with lower quality properties and less reliable tenants.

"Some of them are even single property, single tenant type vehicles, which tend to be more highly indebted as the syndicators have used a lot of debt to try and boost the income yield in the hope of making them more attractive to investors."

If someone was unlucky enough to have one of these, where a tenant has the ability to stop paying rent for a period, things could start to look a bit shaky, and they were often highly illiquid which meant people cannot get their money out, he said.

"At least the listed sector is big, well-diversified, and has access to additional capital if it should be needed. Investors can also sell a few out of they so desire."

Meanwhile, NZX chairman James Millar expects many companies will need to raise equity as they grapple with the impact of the global coronavirus crisis and New Zealand's lockdown for at least four weeks to try to stop the spread of Covid-19.

"We believe the next step is for those companies to recapitalise the equity side and repair their balance sheets which means we expect to see secondary issuance coming to the market," Miller told the annual shareholders' meeting on Wednesday.

He likened the situation to what happened during the global financial crisis when many companies were forced to raise capital to survive.

"We have taken a pragmatic and facilitative approach to dealing with the current market volatility and financial challenges being faced by our listed issuers and market participants."

Miller closed the meeting by repeating a plea to market participants "to put aside our natural competitive instincts and work collaboratively and cooperatively to get the deals done.

"What is happening in front of us is too urgent and too important for rivalry to hold us back. We all pulled together in the GFC and we can do it again now."

• Covid19.govt.nz: The Government's official Covid-19 advisory website