THE BOTTOM LINE
Who’s willing to take a bet on Sun International’s fortunes?
Gaming and leisure group is laden with debt, but says it has plenty of heavyweight support for its rights issue
Debt-laden gaming and leisure group Sun International is not exactly dangling a big juicy carrot in front of shareholders for its proposed R1.5-billion rights issue.
The rights issue price has been pitched at R57.82 a share in the ratio of 25.34 rights offer shares for every 100 shares already held.
The rights offer issue price represents the 10 trading day volume weighted average price of Sun International shares up to Monday this week.
The share has since ticked up through the R61 level – which is encouraging, especially since more than a few punters believe the R1.5-billion capital raising is not enough with Sun International’s total borrowings sitting uncomfortably at R15-billion.What the market might be taking some heart from is that the company – which owns the GrandWest casino in Cape Town and the new Time Square casino near Pretoria – has confirmed shareholder support and underwriting commitments “from certain entities”.
Presumably this means influential (and deep pocketed) shareholder Allan Gray is backing the rights offer.
These unnamed shareholders speak for almost 15.5 million rights offer shares – or R894-million of the envisaged rights offer proceeds.
But more intriguing is Sun International’s disclosure that it has entered into an underwriting agreement with Value Capital Partners (VCP) to partially underwrite the rights offer up to R750-million.
VCP have popped up as strategic shareholders at services company Adcorp and technology conglomerate Altron, and clearly relish turnaround opportunities.
Sun International will certainly gibe VCP all the thrills it craves with the new (and very costly) Time Square casino development ominously lagging initial trading expectations.
Cash flows will need to come up trumps in the next 18 months …