Sun International Gets Easier Loan Terms To Withstand Covid Blow
JOHANNESBURG: Sun International has agreed to easier borrowing terms with its lenders, two sources told Reuters, giving South Africa’s largest casino company a year of financial respite amid third wave of Covid -19 crashes into the tourism industry.
The deal with Standard Bank, Absa Group and Nedbank essentially helps Sun avoid any possibility of default, said one of the sources, who was directly involved in the deal.
It’s also a sign that banks will continue to support the struggling hotel industry more generally, the second source, one of Sun’s executives, said.
Sun had 7.67 billion rand ($ 538 million) in debt as of March 31.
âAbsa and the other lenders remain supportive of Sun International and the actions taken by management,â Absa said in an email response to the questions, without giving details.
Standard Bank and Nedbank declined to comment.
Sun said he would announce any new information with his interim results in September.
South Africa is the most affected country on the continent in terms of coronavirus cases and deaths, accounting for more than a third of confirmed infections and more than 40% of deaths. Only 6% of the country received one or more doses of a vaccine.
The government recently tightened restrictions as cases resumed, forcing most hotels and casinos to temporarily close.
The sources said the new agreement covered payment terms, known as restrictive covenants, but declined to give specific details.
A covenant is typically a measure of the debt-to-earnings ratio (Ebitda) and is closely monitored by banks as part of loan repayment terms.
“A new commitment has been made which is obviously higher. And it is likely for a period of 12 months and will be measured quarterly,” said the source directly involved in the agreement, adding that it was signed at the end of June. .
A higher ratio would allow Sun to have higher debt or lower operating income, or both.
Wayne McCurrie, a portfolio manager in the investment arm of the FNB banking group, said the waivers of covenants were “extremely” important to the hospitality industry.
âThe banks know that the hospitality industry has to stay afloat until the end of this year or the beginning of next year and after that the South African consumer spending figures show that there will in fact be a boom, âhe said.