Sun International has agreed easier borrowing terms with its lenders, two sources told Reuters, giving South Africa's biggest casino firm a year of financial breathing space as a third wave of Covid-19 crashes over the tourism industry. Picture: Simphiwe Mbokazi.
JOHANNESBURG: Sun International has agreed easier borrowing terms with its lenders, two sources told Reuters, giving South Africa's biggest casino firm a year of financial breathing space as a third wave of Covid-19 crashes over the tourism industry.
The deal with Standard Bank, Absa Group and Nedbank essentially helps Sun stave off any prospect of default, said one of the sources, who was directly involved in the deal.
It is also a sign banks will continue to support the stricken hospitality industry more generally, said the second source, from one of Sun's leaders.
Sun had R7.67 billion ($538 million) of debt as of March 31.
"Absa and the other lenders remain supportive of Sun International and the measures taken by management," Absa said in an emailed response to questions, without giving details.
Standard Bank and Nedbank declined to comment.
Sun said it would announce any new information with its interim results in September.
South Africa is the continent's worst-affected nation in terms of coronavirus cases and deaths, accounting for more than a third of confirmed infections and over 40% of fatalities. Only 6% of the country has received one or more doses of a vaccine.
The government has tightened restrictions recently as cases have picked up again, forcing most hotels and casinos to close temporarily.
The sources said the new deal covered terms of payment, known as covenants, but declined to give the precise details.
A covenant is usually a measure of debt-to-core earnings (Ebitda) and is closely monitored by banks as part of loan repayment terms.
"A new covenant has been agreed to, which is obviously higher. And it is likely for a 12-month period and will be measured quarterly," said the source directly involved in the deal, adding it was signed at the end of June.
A higher ratio would allow Sun to have more debt or lower operating profit, or both.
Wayne McCurrie, a portfolio manager at the investment arm of banking group FNB, said covenant waivers were "hugely" important for the hospitality sector.
"Banks know that the hospitality industry needs to stay afloat till the end of this year or early next year and after that South African consumer expenditure numbers show that there will be actually be a boom," he said.
REUTERS
Related Topics: