Sun International plans rights issue


Sun International plans rights issue

Published Date: 2020-06-25 | Source: Stephen Gunnion | Author: Stephen Gunnion

Sun International plans rights issue

As it prepares for a cash call, a Chilean suitor may bid R22 per share for a controlling stake in the hotels and casinos group.

Sun International plans to ask its shareholders for more funds to improve its liquidity and strengthen its balance sheet after revenue dried up due to the Covid-19 lockdown. It says its hotels and resorts are likely to remain under pressure for some time despite the pending relaxation of lockdown restrictions that will allow them to resume trading.

In a business update, the group said it planned to raise R1.2 billion by August and was in discussions with potential underwriters for the rights issue. After trading to the middle of March was in line with last year, with low revenue growth, margin improvement and earnings growth, it slowed down significantly prior to the lockdown. The group closed all operations in Chile on 18 March, followed by its SA operations on 26 March and its casinos in Peru, Argentina, Colombia and Panama at the end of that month.

While it was announced earlier this month that casinos, restaurants, hotels and resorts would soon be allowed to reopen, it expected several restrictions, including limitations on inter-provincial travel that would impact Sun City and Wild Coast Sun. It would also be commercially unviable to reopen hotels such as Table Bay and Maslow Sandton. Regulations around smoking, on-premises alcohol consumption and social distancing would also impact its operations.

As part of its response to the virus, Sun International reduced salaries and working hours for employees, with some workers laid off at substantially reduced salaries. It had also given notice to unions and staff as it closed its Sun Carousel and Naledi operations and restructured some other parts of its business. In total, it was reducing staffing levels by 1,752, mostly at Sun City.

Reports yesterday evening said Chilean investment company Nueva Inversiones Pacifico Sur had made an indicative offer of R22 per share to buy a 50.1% stake in Sun International. Sun International said it was aware of the potential bid but hadn't yet received a formal offer from the company, which owns a stake in its Latin American subsidiary, Sun Dreams. It plans to issue a SENS announcement today. Fin24 reported that Sun International's second largest shareholder, Value Capital Partners planned to oppose the bid as it undervalued the company.

Sun International's shares spiked 22% to R18.10 shortly before the market closed.

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