Eden Hotel to raise Rs. 4.2 b via Rights

• Move aimed at rectifying serious loss of capital and settle debt

Eden Hotel Lanka PLC is to raise Rs. 4.2 billion via a Rights Issue to rectify serious loss of capital and settle debt. 

The move will result in the issuance of 422.4 million shares on the basis of four new shares for one held at Rs. 10 each. The net assets per share is Rs. 6.03 as at 30 June, down from Rs. 17 a year earlier, and Rs. 9.8 as at 31 March.

The current stated capital of the company is Rs. 1.58 billion, represented by 105.6 million shares.

Eden said as per interim financial statements as at 30 June, the equity of the company has eroded to less than 50% of its stated capital. Equity capital amounted to Rs. 636,831, which is 40.2% of stated capital. Stated capital of Rs. 1.58 billion and Rs. 2.1 billion of capital reserves were against a negative Rs. 3.04 billion of revenue reserves. 

In terms of the Companies Act. No.7 of 2007, Eden will convene an EGM to notify shareholders on the current status of the company and steps proposed by the Board to recoup the losses. 

The Rights Issue is subject to shareholder and CSE approval. 

Major shareholders of Eden are Palm Garden Hotels (46.2%) and Browns Hotels and Resorts (42.6%). The public holding percentage as at 30 June was 11.18% comprising of 5,110 shareholders.

As at 30 June, the company held Rs. 538 million of long-term loans and borrowings and Rs. 736 million in short-term loans and borrowings, and Rs. 166.4 million as bank overdraft.

In the first quarter of FY21, Eden Group after tax loss was Rs. 562 million, up from Rs. 455 million loss a year earlier. 

Due to the COVID-19 pandemic, Eden Hotel Lanka PLC, Dickwella Resorts Ltd., Green Paradise Ltd., and Sun and Fun Resorts Ltd., (subsidiaries of Eden Hotel Lanka PLC), temporarily suspended its commercial operations in the month of April and May.

The quarterly financial statements reflect the impact of minimal business operations due to the closure of the hotel and COVID-19 pandemic.

Eden management has considered the short-term to medium term strategies for all the properties and from June onwards, operating hotels commenced its commercial operations as quarantine hotels which will support cash flows.