Sun International offers share sell off to service its $120m debt
One of South Africa’s biggest hotel groups Sun International is looking to sell more than 25.9 million shares in order to raise R1.5 billion ($120m) to repay its debt.
The company owns South Africa’s most exciting resort Sun City in the North West of the country but its expansion, especially into Latin America, has contributed to its restructure.
The story has been widely reported across South African media outlets after Reuters published the story on May 8. Sun International has been on a money saving drive for more than 12 months resulting in the ‘restructuring’ of unprofitable resorts and casinos in South America and Africa
“Hotel and casino group, Sun International is reportedly drowning in debt,” according to Business Report section of www.iol.co.za yesterday.
Sun International said it plans to offer the shares at 57.82 rand per rights offer share in the ratio of 25.34 rights offer shares for every 100 existing ordinary shares held on the record date of May 18, 2018.
“The proceeds from the rights offer will be used to repay debt, thereby creating head room in relation to relevant debt covenants,” the firm said
The firm said Value Capital Partners would partially underwrite the rights offer up to a maximum amount of 750 million rand. ($1 = 12.6043 rand)
In March, the group said that it had closed down operations, that were not making any money in South Africa, Colombia and, Panama, in a bid to focus on reducing its debt.
Sun International has diversified into new markets, most notably in Latin America, beginning in Chile 10 years ago. It was hoped this would offset slow growth in the South African market.
But with the immediate need to reduce debt, Sun International announced the closure of the Fish River Sun resort near Port Alfred, Sun Nao Casino in Colombia and the International VIP Business in South Africa and Panama.
Sun International chief executive Anthony Leeming said the group had closed the Fish River Sun in November, following land claims on the property.
He said the group would also downscale the Ocean Sun Casino in Panama by cutting staff numbers.
Leeming said the company had also applied to the Eastern Cape Gaming Board to restructure the Boardwalk Casino in Port Elizabeth.
Sun International said it would address performance problems at Carousel Casino in the North West and Naledi Sun Hotel and Casino in the Free State.
De Wet Schutte, an analyst at Avior Capital Markets, yesterday said that the move to close some of the businesses was expected.