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| Thursday, 25 September 2003 |
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JKH to raise Rs. 6.4 b through Rights Issue, Private Placement by Ravi Ladduwahetty Sri Lanka's premier diversified blue chip corporate leader John Keells Holdings Ltd (JKH) will raise Rs. 6.4 billion through a Rights Issue and a Private Placement which will set off the loans and other funding which went into the purchase of the 60.5 equity stake of Asian Hotels for Rs. 4.1 billion last Friday. This follows the emergency meeting of the Board of Directors on Tuesday night where it was decided to raise equity capital which will enable the Group to reduce its current debt component and facilitate the requisite gearing flexibility in financing the new investment opportunities. The Rights Issue will be for the existing shareholders where they can receive one to every seven shares held in the company at Rs. 75 (with a premium of Rs. 65) while also having a new private placement of 24 million shares, which is 10 percent of the issued share capital, JKH Group Chairman Vivendra Lintotawela told the Daily News yesterday. The Rights Issue will open after an Extraordinary Annual General Meeting which will be towards mid October following 21 days notice to the shareholders and the price at which the aspiring shareholders will be buying the new shares at the private placement will be at the market rate on the day of the Extraordinary General Meeting, Lintotawela said. He said that the Rights Issue and the private placement will aim to set off around Rs. 2 billion of the loans which has been taken from all the banks to cover the Asian Hotels purchase. The target of Rs. 6.4 billion is very adequate, he said. The application made to the Colombo Stock Exchange for a quotation of up to Rs. 24 million new Ordinary Shares raised through the private placement has been provisionally approved and once the shareholders have passed the requisite resolutions, the Board will place the shares with identified investors. Based on the recent investor and analysts feedback, the Board of Directors are very confident of the feedback, he said. The Group is actively pursuing other investment opportunities which have a strong strategic fit with its core business sectors. Thus, the company believed that it is prudent and opportune to increase its share capital, both authorised and issued, in increasing its gearing flexibility when financing future investments, he said. John Keells Holdings Joint Managing Director Susantha Ratnayake, who is functioning as the Executive Director of Asian Hotels looking after the Group's interests in the new acquisition, told the Daily News yesterday that the negotiations with the two five star chains- Sheraton and Marriott will continue. He said that the negotiations with Banyan Tree will also continue to develop Ahungalla while two of the existing properties will also undergo major conversions, though being tight lipped about the details. We are looking at all the investments and the operational opportunities with an open mind and we are not rushing into anything arbitrarily, Ratnayake said. Meanwhile, Fitch Ratings Lanka Ltd (FRL) has awarded John Keells Holdings Ltd (JKH) a SL AA+ national rating for Implied Long-term unsecured Senior Debt following the AHOT acquisition and the forthcoming Rights Issue and private placement. Fitch Ratings Lanka Ltd (FRL) Managing Director/ CEO Ravi Abeysuriya said that the rating denotes a very low expectation of credit risk. It indicates very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. The increased equity would reduce JKH's Debt/Equity ratio to approximately 25-35%. The Debt/Equity ratio was 55%, he said. Abeysuriya said: "Furthermore, other creditor protection measures of EBITDA/Interest and Total Debt/EBITDA would also improve to approximately 10(x) and 1.2(x) respectively, and are very comfortable for this rating category. Whilst capital investments for improvements to the acquired properties are also envisaged in the near term; they are unlikely to have a significant credit impact. The acquisition adds two hotel properties to JKH's leisure segment doubling total assets of the segment. As a result the leisure segment would now account for approximately 40% of total assets of the group. |
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