Dasin Retail Trust Valuation Dropped By 23%-Auto Trigger Breach Of All Offshore Facilities Covenants.

I was stupefied to see that Dasin Retail Trust ("Dasin") announced a trading suspension on 3 July 2023. Upon delving in for a deeper look, I realised that Dasin had also earlier released a valuation report by Jones Lang LaSalle which announced a shocking 23% (-S$350Mil) plunge in fair valuation of its investment properties as at 31 December 2022 relative to FY2021. In FY2021, S$127Mil were already written down. While more and more cans of worms surfaced, I did not expect the end of Dasin to come so soon as the management seems to be able to get special short term extension time and time again of loan facilities from its bankers for the past 2 years. But alas, this 23% plunge in valuation maybe the final straw that breaks the camel's back- it means an  automatic breach of the gearing ratio, interest coverage ratio and loan to valuation ratio which Dasin is obliged to maintain under its Offshore Facilities. 

Worst Not Over

I reckon that the 23% plunge in fair valuation is just the tip of the ice-berg. It was reported in various online media that a number of shopping malls in China are now facing existential crisis despite the re-opening of China post COVID. 

The offshore bankers may finally decide to throw in the towel and press for the liquidation of Dasin to try to recover whatever they could from the bad debt. The fire-sales of the shopping malls portfolio of Dasin may lead to another 50% plunge in valuation. 

Parting Thoughts

If the trading suspension does not get lifted anytime soon, it will mean that Dasin is on its way to face the same tragic fate as Eagle Hospitality Trust. The attempt to raise funds by selling one or more malls has been mentioned again and again by the management of Dasin but no actual corporate action has materialized thus far. It does not help that its Sponsor (Zhongshan Dasin Real Estate Co.,Ltd) is facing financial woes and will be unable to rescue Dasin unlike the case of Manulife US REIT. Worst is that the sponsor & the current manager (Sino-Ocean) are having infighting- law suit has been filed- over the control of Dasin.