Sun International rights issue shock fades
SUN INTERNATIONAL fell nearly 5 percent on the JSE yesterday after the hotel and leisure group announced that it planned to raise up to R1.5 billion through a rights offer for 2 594 million offer shares to pay its debt. The company’s stock closed 3.47 percent higher at R64.15 from Tuesday’s R62 as the market warmed up to the rights offer.
Sun International said it anticipated that the rights offer would be finalised today.
The group has concluded a number of transactions and projects which were funded through debt, including the opening of the Ocean Sun Casino (OSC) in Panama and the Sun Nao Casino (SNC) in Colombia as well as the merger of its Latin American operations with that of Dreams SA.
The group also acquired 70 percent of SunSlots (formerly GPI Slots), spent money on the construction of Times Square and the refurbishment of a number of Sun International’s existing hotels and casinos.
“All of the above projects and acquisitions were funded through debt,” Sun International said, “and, following the merger with Dreams SA in 2016, Sun International reorganised its debt, which was separately raised and ringfenced in Latin America, South Africa and Nigeria.”
Last year Sun International said that its borrowings had risen to R15bn, of which R11.4bn was attributable to the South African balance sheet. The South African debt includes the investments made in OSC and SNC. The company also said that it had outstanding capital investment commitments of approximately R230 million to complete the Time Square development.
However, due to difficult trading conditions and Time Square trading well behind expectations, the company renegotiated its South African debt covenant levels for June 2017 and December 2017.
“Although trading has improved marginally at Time Square and the company met its debt covenants at December 31, 2017, the board has nevertheless deemed it prudent to embark on a capital raise exercise in order to de-risk its balance sheet,” the group said.
A stronger balance sheet and capital structure will afford management greater operational freedom and the ability to focus on the stated “back to basics” strategy.