Orchard delivers on some funds, not on others

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Orchard Funds Management will be paying distributions on seven of its funds this month, although its flagship diversified property fund income payments still remain suspended.

Distributions will be paid for the Childcare Property Fund, Essential HealthCare Trust, Hybrid Property Fund, Banksia St Heidelberg Joint Venture, Sydney Healthcare Trust, Barossa Valley Resort and the Primary Health Care Darlinghurst Syndicate.

However, other Orchard funds are still facing financing difficulties due to falling property values.

The Diversified Property Fund is likely to breach its interest cover ratios with National Bank, Bank of Scotland and Commonwealth in the near future, the manager said in a report to investors.

It repaid $3 million of debt at the end of this financial year and is required to repay a further $60 million by December 31.

The fund's assets are valued at $933 million and the manager has been selling properties to reduce debt.

The fund has borrowings of $365 million and in the 2009 financial year paid $700,000 of bank charges on the loan.

Orchard chief executive officer David Hinde said an independent review of the fund by KPMG was underway to look at restructuring alternatives.

“The result of this review is expected to identify a long-term solution to all stakeholders in the fund,” he said.

“Guidance on resuming distributions cannot be made until after the strategic review process has been considered and recommendations implemented.”

Orchard has also renegotiated an extension to its loan facility with the National Bank for another three years for its Commercial Office Fund.

The fund manager is again likely to breach the loan covenants of its National and Suncorp financing of $190 million due to falling asset values. It has unaudited assets of $391 million.

Hinde said plans for a $50 million capital raising for the fund had been completed and a Product Disclosure Statement would be issued shortly.

The manager is also considering a rights issue for its Chevron Renaissance Property Trust and a restructuring plan for the Primary Infrastructure Fund is also being finalised.

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