China Investment Corporation commits A$200m to Australia’s Goodman Group

The cash infusion will help Goodman meet liabilities this year. The Australian property group says the agreement with CIC also envisages the pair working on a broader strategic relationship.

China’s sovereign wealth fund has agreed to provide A$200 million ($159 million) of financing to under-pressure Australian property company, Goodman Group.

In a statement, Goodman said it has agreed with the China Investment Corporation (CIC) to “work in good faith” towards a “broader relationship”.

The news coincides today with a pledge by Chinese president Hu Jintao that China will extend a $10 billion loan to Russia and four Central Asian states to help them through the economic turmoil.

The assistance to Goodman follows a banking facility provided last month by Macquarie Bank. When combined with the fresh resources from CIC, Goodman has A$485 million to draw upon.

The A$485 million is structured as a 9 month financing facility that expires in February 2010, but it can be extended for another 15 months after that. In addition, Goodman has agreed to grant 255.3 million of share options to be sold together to the two investors according to the size of their investment.

In the statement, Goodman said the combined facility from CIC and Macquarie gives the company “additional liquidity headroom” and all its commitments can be repaid in full this year from available resources.

The company added it will be more conservatively leveraged in the future as it continues to shed assets.

The Goodman Group is the largest industrial property group listed in Australia with operations in Australia, New Zealand, Asia, and Europe.

It has been under pressure because it has about A$225 million of debt due to expire in September and December.

In May rating agency Standard & Poors placed the group on negative credit watch even after Macquarie's assistance because of its long-term funding commitments.

The agency said it was concerned that Goodman had reduced access to capital given the challenging conditions in global debt markets and Goodman’s weak share price and that to remove the negative pressure on its credit rating it would need to adopt a “significantly more conservative prudential framework in the very near term.”