South Africa’s Sun International said it is looking at raising additional capital to reduce risk elements in its balance sheet.
The hospitality group said despite the fact that it is generating strong cash flows and Sun International has renegotiated its debt covenant levels for June 2017 and December 2017, the Company’s board of directors has nevertheless deemed it prudent to consider raising additional capital in the market in order to de-risk the balance sheet. It is envisaged that any proceeds from such a capital raise exercise would be used to repay debt, thereby creating headroom in relation to the relevant debt covenants.
The group said it believes a stronger balance sheet and capital structure will also afford management greater operational freedom and the ability to focus its time and efforts on the stated ‘back to basics’ strategy as well as reducing Sun International’s interest charge, as rates are based on the Company’s prevailing debt metrics.
The company said it has canvassed the feasibility and timing of a rights offer with several of its major shareholders. While these shareholders are unanimous in their support for Sun International conducting a rights offer, the Board has decided that, due to the practicality of running a rights offer process over a December / January period, any decision regarding a potential capital raise exercise will be re-assessed early next year.
Accordingly, a further announcement will be made to shareholders, providing them with information regarding the Board’s intentions around any capital raise exercise for the Company in early 2018, and potentially only following the announcement of Sun International’s annual financial results for the year ending 31 December 2017, which are expected to be announced on or about 19 March 2018.
Sun International has not mentioned how much it plans to raise.