Browns Beach to go for Rs.1.4bn rights issue

Browns Beach Hotels PLC (BBH) is expecting to raise Rs.1.4 billion through a rights issue on April 24, amid protest from the major shareholders due to the devalued market prices of the BBH shares. 
Last August, BBH’s director board had approved a plan to issue five new ordinary shares for every 12 ordinary shares held by the shareholders for a total issue of 54 million shares for a consideration of Rs.25.85 per share. However, the market price of a BBH share was Rs.20 at closing yesterday. Around 90 percent of the shares in BBH are directly and indirectly held by the companies controlled by the business tycoon, Harry Jayawardena.

However, due to the current low prices of BBH shares, the major shareholders had requested the Colombo Stock Exchange (CSE) for a price revision.
“The CSE was not agreeable to such a price revision on the basis that such a revision would result in misleading the market, which has already reacted to the price announced by the company,” a BBH shareholder circular said.
Accordingly, of the related parties owning 90 percent of the shares, those holding approximately 53 percent of the issued shares of BBH have notified that they would not be subscribing to the rights issue due to the price difference.
The funds raised from the rights issue were to be utilized to partly repay Rs.2.5 billion in loans drawn for the construction of the hotel and in the event of an undersubscription of the rights issue, the company expects to restructure the loan after negotiating with the bank.
During the 2016/17 financial year, during which the hotel came into operation, BBH had posted a net loss of Rs.112.65 million for its third quarter ending December 31, 2016.
Revenue for the quarter was Rs.164.14 million, while the operating losses were Rs.32 million and the finance expenses were Rs.80.89 million.
BBH had a total asset base of Rs.6.06 billion as at December 31, 2016, up from Rs.5.66 billion at the start of the financial year, while it had Rs.2.55 billion in interest-bearing borrowings, up from Rs.2.07 billion during the same time span.
The net asset value per share was Rs.23.70 at the end of the third quarter, falling from Rs.26.57 at the start of the financial year.