Casino resort investor Suncity Group Holdings Ltd says that a proposed two-year extension on the maturity date of convertible bonds was the most feasible option to “ease the immediate financial pressure” on the company.
Suncity Group Holdings, controlled by Macau junket investor Alvin Chau Cheok Wa, said in October it had an agreement with a lender for a two-year extension, to December 7, 2022, on the maturity date of convertible bonds. The bonds are held by Mr Chau and fellow controlling shareholder Cheng Ting Kong.
The outstanding principal amount on the bonds – which are currently due to mature on December 7 – is HKD402 million (US$51.9 million). The extension of the maturity date still needs to be approved by Suncity Group Holdings’ shareholders.
In a Thursday filing, the Hong Kong-listed company said it did not have “sufficient cash” to redeem the outstanding bonds by the December 7 deadline. The group said that as of June 30, it had available cash equivalent to approximately HKD255.8 million.
It added that the two-year extension “provides a reasonable time frame” for Suncity Group Holdings “to develop its business plan and will allow the company’s financial performance to improve accordingly.”
The company said additionally that it had agreed to maintain the conversion price of the outstanding bonds at HKD0.26, given that such bonds were interest-free and the extension “would ease the immediate financial pressure of the group”. The conversion price represents a discount of 62.86 percent to the closing price of HKD0.70 per share on the last trading day prior to the date of the supplemental deed, it added.
Suncity Group Holdings said it had considered financing alternatives – such as equity financing and bank borrowings – to raise funds to repay the outstanding bonds, but those were viable options.
“It would be difficult for the group to obtain new borrowings on terms satisfactory to the group in view of the net current liabilities position of the group as at 30 June 2020,” stated the company.
The firm also said it had explored in September – in negotiation with two securities firms – the possibility of equity financing by “rights issue or open offer and/or placing new shares to independent investors” with a fund-raising size of HKD400 million.
It added: “However, both securities firms expressed that they are not prepared to act as underwriter for rights issue or open offer of the fund-raising size desirable by the group in light of current volatile market sentiment and net current liabilities position of the group as at 30 June 2020.”
The company announced in August that Mr Chau was exchanging a series of shareholder loans to the company – amounting in aggregate to HKD3.88 billion – for a set of “perpetual securities”. But the funds raised by the issuance of perpetual securities were used for other investing and corporate purposes, and such option was “not a feasible financing alternative,” said Suncity Group Holdings in Thursday’s filing.