Global Data Centre Group updates its distribution guidance following the AirTrunk divestment, factoring in operational costs and risk reserves that temper immediate payouts.
- Recommended distribution lowered to A$1.44 per security
- Risk and operating cost holdbacks totaling $14.3 million impact payout timing
- Potential future return of risk holdback funds to securityholders
- Full repayment of US$9.48 million loan related to AirTrunk divestment completed
- Final distribution expected by end of May 2025
Context of Distribution Update
Global Data Centre Group (ASX: GDC) has provided a significant update on its distribution plans following the indirect disposal of its investment in AirTrunk in December 2024. This announcement comes after the group's half-year results for the period ending December 31, 2024, where it reaffirmed its FY25 distribution guidance range of A$1.55 to A$1.57 per security.
Revised Distribution and Holdbacks Explained
Since that announcement, Evolution Trustees Limited, acting as the responsible entity, in consultation with Lanrik Partners, has recommended a further distribution of A$1.44 per security. This figure is notably lower than the earlier guidance. The reduction is primarily due to two key factors: a forecasted operating cost holdback of approximately $2.3 million to cover expenses through the wind-down period projected until FY32, and a risk holdback of $12 million to address potential tax and contractual obligations stemming from past asset disposals.
The risk holdback is a cautious measure, reflecting uncertainties around possible claims. However, the responsible entity has indicated that if these risks diminish over time, the funds held back could be progressively returned to securityholders as additional distributions. Should no claims arise, the risk holdback could translate into an extra $0.134 per security, bringing the total potential distribution close to the original guidance range.
Loan Repayment and Capital Return
In a related development, GDC confirmed the full repayment of a US$9.48 million loan associated with the AirTrunk divestment. This repayment was facilitated by a capital return from MAIF 2 Investments Australia Pte. Ltd, effectively settling the outstanding loan amount. This transaction underscores the group's progress in managing the financial complexities following the divestment.
Looking Ahead
GDC aims to finalise the recommended distribution determination promptly, with payments expected to be made to securityholders by the end of May 2025. The group continues to navigate the wind-down phase with a focus on balancing immediate returns with prudent risk management.
Bottom Line?
GDC’s cautious approach to distributions reflects a balancing act between returning value and managing lingering risks post-AirTrunk sale.
Questions in the middle?
- How will evolving tax and contractual risks affect future distributions?
- What impact will the wind-down operating costs have on GDC’s remaining asset management?
- Could further capital returns or asset sales accelerate the wind-down timeline?