Tsogo Sun Hotels sells its 50% interest in Seychelles asset
The group will use the R465m sale price to help reduce its dollar-denominated debt
Tsogo Sun Hotels will sell its stake in United Resorts and Hotels, which has assets in the Seychelles, for R465m.
The money, which represents about a fifth of the group’s R2.3bn market capitalisation, will help Tsogo Sun Hotels reduce its debt. The hotel industry is struggling to survive amid the economic uncertainty brought about by the Covid-19 pandemic, which has brought the tourism industry to a standstill.
At the end of March, the group had net debt of R3.3bn.
Tsogo Sun Hotels said on Tuesday that Covid-19 had limited the group’s ability to apply its cash resources towards the settlement of this debt. The group has been trying to reduce its dollar-denominated debt because of the high interest costs on it.
“The disposal consideration allows the group to achieve this objective and, accordingly, the company believes that it is in the best interest of the group to dispose of the assets at this time,” it said.
United Resorts and Hotels owns properties and land on a leasehold basis at Anse Louis, Mahé Island in the Seychelles, including 30 luxury villas, known as Maia Luxury Resort and Spa.
Tsogo Sun owned 50% in United through its wholly owned subsidiary, Southern Sun Africa (SSA). The shares have been sold to Minor Hotels Group.
The carrying value of the investment was R124m at the end of March, according to Tsogo’s latest full-year financial results. The group’s share of United’s profit and management fees after tax for the year ended March was R13m.
Tsogo has been trying to manage the Covid-19 pandemic, which has been rampaging through SA’s hospitality industry since March, causing hotels and resorts to shut to avoid the spread of the coronavirus.
Tsogo had to close its 103 hotels at the end of March because of the government-imposed lockdown. The government has since allowed hotels to open but under strict conditions. Tsogo Sun has since opened 30 hotels but with very low occupancy.
Last week, Tsogo said it would take over the managing function of Protea Hotel Hazyview in Mpumalanga, Protea Hotel Durban Edward and the Mount Grace Country House & Spa from Marriott International, which ended its lease agreement to manage the hotels.
Tsogo Sun Hotels CEO Marcel von Aulock said the three hotels were valuable and could be returned to their former glory instead of having to close.
Tsogo Sun was broken into two parts in 2019 — Tsogo Sun Hotels and the gambling business, Tsogo Sun Gaming — which are now separately listed.
Update: July 15 2020
This article has been updated with additional information.
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