Galadari finally hits the beach, Rs. 6.3 b in debt to be converted to equity

In a bid to better ride the post-war flood of tourists, Galadari Hotels has finally struck a deal to convert Rs. 6.3 billion of debt into equity.

The company said yesterday that its Board at a meeting held on 27 April unanimously resolved to restructure the Balance Sheet in a manner which would enable Galadari Hotel to capture to its benefit the positive growth trends expected in the tourism industry and to operate competitively and profitably.

The Board has approved in principle that the restructuring should be by way of a conversion of debt to equity.

The debt so converted to equity will be Rs. 5.75 billion owed to Galadari Brothers Company LLC and Rs. 583.4 million owed to National Insurance Trust Fund (NITF).

The conversion will be effected by way of a private placement of shares and subject to regulatory and shareholder approval. The company’s shares will be valued afresh prior to determine the conversion price and issuance of shares.

The announcement which has been long awaited saw Galadari share price rise to Rs. 34.70 from its previous close of Rs. 30.50 whilst it finished the day at Rs. 33.40, up by Rs. 2.90. Net Asset per share as at end 2010 was Rs. 7.56 whilst by first quarter of 2011 it had increased to Rs. 8.61.

EPF is the single largest shareholder of Galadari Hotels (Lanka) Plc with a 13% stake whilst Galadari brothers collectively own over 40% stake.

In the first quarter of 2011, the company posted a profit of Rs. 43.7 million as against a loss of Rs. 1.6.6 million in the corresponding period of last year. Top line grew to Rs. 367.4 million from Rs. 244.6 million in the first quarter of 2010.

In the financial year ended 31 December, 2010, Galadari saw its top line surpass the Rs. 1 billion mark, up from Rs. 737 million in 2009 whilst net profit was Rs. 33.8 million, a complete turnaround from Rs. 352 million loss in 2009.

Long-term loans as at 31 March, 2011 was Rs. 6.04 billion whilst it also had Rs. 315 million in short term loans. As at 31 December, 2010 they amounted to Rs. 6.28 billion and Rs. 54.4 million whilst as at 31 March, 2010 the figures were Rs. 6.36 billion and Rs. 60.21 million respectively.

As at 31 March, 2011, the company was burdened with Rs. 8.915 billion in accumulated losses, down from Rs. 9 billion a year earlier and Rs. 8.965 billion as at 31 December, 2010.