Hotel turns to banks for bond cover
San Antonio Hotel in Buġibba is seeking bank financing to cover the redemption of bonds in two years' time after the company failed to raise a capital reserve fund promised in the prospectus, the company announced yesterday.
The €5.8 million bonds issued in 2002 had an attractive 7.5 per cent interest rate and were listed on the Malta Stock Exchange.
The move will not have an impact on bond holders, according to company secretary Pierre Mangani, who insisted the hotel had assets of €13.6 million, which were "substantially in excess of the value of the bonds". Speaking to The Times, he said over the past years, despite a positive performance, the company did not generate enough extra cash to put aside in a dedicated fund.
The offering memorandum that accompanied the bond issue had stipulated the company would create the capital reserve fund from "available free cash flows". Mr Mangani also reassured bond holders their money was safe.
"Bond holders can put their minds at rest since the bonds are issued directly by the hotel and the assets far outstrip the value of the bonds," Mr Mangani said.
The company was collaborating with its bankers, he added, to secure the required financing to cover the bond redemptions when they mature on May 30, 2012.
"The company's proposals are receiving favourable considerations by its bankers and the company expects to conclude negotiations over the coming days," Mr Mangani said.
Although the announcement may send jitters down the spine of San Antonio Hotel plc bond holders, a stockbroker told this newspaper the situation was not worrying.
Most of the bond issues are never covered by a special reserve fund, with company assets normally covering the value of the bonds, he said, insisting that in this case the company's assets were more than adequate.