Sun International shares slide after statement on rights issue
Sun International’s share price fell as much as 12.8% to R59.50 on Friday after the hotel and casino group said it was seeking shareholder approval to hold a rights issue.
Friday’s statement did not say how much capital Sun International proposed to raise by issuing new shares, but did give a summary of the group’s debt problems.
At December 31, Sun International’s borrowings were R15bn, of which R11.4bn was on the balance sheet of its JSE-listed South African operations.
This included debt taken on to invest in Ocean Sun Casino in Panama and the Sun Nao Casino in Colombia.
Sun International also still needs to pay R230m to complete its Time Square development in Gauteng.
"Accordingly, the proceeds from the proposed rights offer will be used to repay debt, thereby creating head room in relation to relevant debt covenants," the statement said.
"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. In addition, the proposed rights offer will reduce Sun International’s interest charge as rates are based on Sun International’s prevailing debt metrics."