Sun International’s shares drop more than 6 percent
Hotel and leisure group to go ahead with its planned R1.2 billion rights offer to strengthen its balance sheet
SUN International’s share price declined by more than 6 percent on the JSE yesterday after the hotel and leisure group said it would go ahead with its planned R1.2 billion rights offer to strengthen its balance sheet.
The group announced the rights offer, scheduled for August, last month.
Sun International proposes raising R1.2bn by way of a partially underwritten renounceable rights offer of 127.17 million Sun International shares at R9.44 per rights offer share, in the ratio of 93.01 rights offer shares for every 100 existing Sun International ordinary shares held on the record date for the rights offer, on July 24.
The R9.44 per rights offer share represents a 25 percent discount to the theoretical ex-rights price, based on the 30 trading day volume weighted average price of R15.51 at which shares traded on the JSE on July 13.
However, the group’s share price declined to R14.04 in the afternoon, down from Monday’s closing price of R15. It recovered some of the losses before closing at R14.85.
After the South African government implemented level 5 of the lockdown on March 26, the group’s operations ground to a halt, forcing the group to close its hotels and creating uncertainty in the industry.
“Due to the anticipated challenges and uncertainty in the short to medium-term and with Sun International and its subsidiaries having to deal with the effects of a sharp decline in economic activity and prolonged closure of its operations, the board has deemed it prudent to embark on the rights offer, which will improve its liquidity and strengthen the balance sheet,” the group said.
Sun International said the proceeds of the rights offer would enable it to position itself for the resumption of full trading post the pandemic.
The group closed all operations in Chile on March 18 and South African operations on March 26 as well as its casinos in Peru, Argentina, Colombia and Panama at the end of March.
Sun International said last month that in terms of the debt concessions, capital payments for June 30 to March 2021 were deferred, and would resume on June 30. The waived amounts would be amortised over the remaining period. Interest and dividend service would recommence on December 31 if Sun International resumed operations by November 15.
Current contractual covenants were waived until June 30, 2021, and new covenant levels would be agreed by March 31, 2021. Failure to resume at least 50 percent of operations by January 1 would trigger the right for lenders to declare an event of default.
However, it is not the first time that Sun International has asked its shareholders for funds. In 2018 the group also raised R1.5bn through a rights offer in 2018 to pay its debt.
The group said it had entered into an underwriting agreement with Value Capital Partners and Steyn Capital Management “of which they separately and respectively undertake to partially underwrite the rights offer up to a maximum aggregate amount of R360 million”, in a move to provide the company and shareholders with certainty regarding the successful implementation of the rights offer.
Last month, Sun International received a R1.5bn offer from Chilean partner Nueva Inversiones Pacifico Sur (IPS) to buy the group, but rejected it.
IPS made a bid to acquire 50.1 percent of Sun International through a partial cash offer of R22 a share.
The Nueva offer included a proposal to provide Sun International with interim liquidity support in the form of a bridge loan, which would strengthen the balance sheet and address liquidity concerns.
The group expects to release the results of the rights offer on August 11.