Hotel San Antonio plc shows 'financial muscle'

Hotel San Antonio plc's plans to buy up to €2 million in bonds from its bondholders stem from its success in "substantially" reducing its bank financing thanks to positive performance, company secretary Pierre Mangani told The Times Business. Meanwhile, sources have described Hotel San Antonio plc's announcement as "very good news" for investors in the company.

In an announcement on the Stock Exchange last Friday, the company said it intended to buy 7.5 per cent Bonds 2012 from bondholders on the open market. It was not, the company emphasised, an early redemption. Any bonds purchased would be cancelled.

"Over the years the company has managed to reduce substantially its bank financing, thanks to a positive performance," Mr Mangani said. "This has given the company more financial muscle, and, consequently, it is in a position to buy back for cancellation its own bonds in the event that any bondholders would prefer to liquidate their investment."

Pressed about the reasons behind the decision, Mr Mangani explained the bonds were issued by Hotel San Antonio plc, the same company that owned the four-star Qawra property, meaning the bonds were backed by an entity owning the freehold of more than 11 tumoli of prime land in Bugibba and a 300-room hotel with net assets gross of the bonds of €13.9 million according to the publicly available audited accounts.

"This, in itself, should be reassurance over an issue of €5.8 million in bonds for any informed investor," Mr Mangani emphasised. "However, the directors of Hotel San Antonio plc wanted to offer bondholders who might want to liquidate their investment (the opportunity) to buy their bonds for cancellation. In this manner we are showing our absolute faith in Hotel San Antonio plc and are probably the first company that has bought its own bonds for cancellation, well before the redemption date."

Mr Mangani pointed out Hotel San Antonio shareholders had a long history of successful investments in tourism and felt they had "much more to offer" to this industry.

"(They) may well be willing to offer other opportunities to the investing public to participate in this vital industry for Malta. They are showing full confidence in their ventures," Mr Mangani added.

Informed sources said Hotel San Antonio plc's announcement had taken the investing community by surprise as intentions to buy bonds in this manner are not usually made public, although the statement was issued in compliance with Listing Authority rules.

"It is very good news for bondholders," the sources said. "First of all, it gives bondholders an exit route option should they want to take it. Secondly, this is what we have always wanted as a liquid market."

Sources pointed out that companies buying bonds off bondholders is not entirely new to the local market and explained that the step is usually taken either for captive purposes as companies pay interest on the bonds to themselves, or cancel them to stop paying interest.

On June 10, investors' eyebrows were raised when Hotel San Antonio plc announced it had obtained full financing from its bankers to cover the redemption of the 7.5 per cent Bonds 2012 and the further improvements of the Qawra property. It said bankers had demonstrated "complete confidence" in the company.

Some days earlier, Hotel San Antonio plc admitted that as at the date of its audited financial statements for the year ended December 31, 2009, it had not set up a capital reserve fund to cover the redemption of its 7.5 per cent bonds. The company had failed to generate available free cash flows as defined by the offering memorandum.

The bond issue was launched in 2002 and listed on the Malta Stock Exchange. Interest payments have been made every year since.

Meanwhile, the chairman and directors are to hold an information meeting with the press and stockbrokers later this week.