JKH shops for foreign funds for Beira casino-related project

John Keells Holdings (JKH) have held meetings with international fund managers over the past month in a bid to raise funds for its mega US$820 million integrated development project on the Beira waterfront bordering its former headquarters.

The project undertaken by Waterfront Properties (Pvt) Ltd which includes a hotel, casino and other develop- ments was approved by JKH shareholders at the Extraordinary General Meeting (EGM) held in recently.

"JKH officials met with fund managers in Malaysia, Singapore and Hong Kong. They'll be going to London, the US, etc. as well," a company source told the Business Times.

The company has called another EGM for October 2 to seek shareholder approval of the rights issue and issue of warrants aimed at raising Rs. 40 billion ($303 million) of the required investment with the balance coming elsewhere including foreign funds.Analysts say this equity raising and the resultant dilution in share price makes JKH a pricey short to medium term investment. Some shareholders are grumbling over the rights issue saying the last time when JKH floated a rights issue it was not used for development but in the collection of interest income.

Analysts say that the company will rent out the total of 150,000 square feet of the gaming unit to an unidentified major foreign operator. “The operator will bring in a gaming franchise, and will provide Waterfront Properties with a fixed rent and 60 per cent of all Net Revenues. We believe these plans will save JKH the trouble of reinventing the wheel with the established player’s ability to leverage on its marketing network, ability to draw crowds and create demand in a new location,” an analyst said.

The headquarters building, which was located in an old warehouse, has been pulled down to make way for the new development and most JKH offices shifted to a building adjoining the Cinnamon Lakeside hotel, which is owned by the group.

Under the rights issue, shareholders will be offered 2 ordinary shares for every 13 shares they hold at Rs 175 per share. The rights issue will have two attached warrants which entitles the shareholder to one ordinary share.