Hit by Covid-19, Sun International rolls out a R1.2 billion rights issue

  • The rights issue will help the company strengthen its balance sheet post Covid-19 lockdown
  • Sun International has a R1.7 billion market capitalisation 
  • The hotel group is faced with a debt problem

Sun International, facing the impact of the coronavirus lockdown, has announced a R1.2 billion rights offer, in a move intended to help the company navigate the post Covid-19 trade conditions. 

In a notice to shareholders on Friday, the hotel group - which is facing a significant debt challenge - said the capital would help it "position itself for the resumption of full trading post the Covid-19 lockdown". 

With hotels and casinos forced to close across the country, the company was obliged to shut doors in late March following restrictions imposed by the government to fight the spread of the virus. 

The board announced that the company would embark on a rights offer to raise approximately R1.2 billion which will improve the  "company’s liquidity and strengthen its balance sheet".

The company's market capitalisation stands at R1.7 billion.

Full-year financial results in March showed that he company, which operates hotel and casinos in South Africa and Latin America, had snipped its debt burden from R9.2 billion to R8.8 billion, as key holiday establishment came under pressure from slow consumer spending.

It's premier resort, the Sun City, recorded a -6% decline in income.  

The hotel and accommodation industry has been hit hardest by the current lockdown, with companies in the sectors warning that the prolonged shutdown would devastate operations and force job cuts.

In a different notice, City Lodge said it had been granted a R200 million by its funders, in addition to its undrawn facility, in what would ensure liquidity.

Hotels remain closed under the current alert level 3, with no indication when the sector might be allowed to operate again. 

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