City Lodge plans to raise R1,2bn via a rights offer, as it battles cash-flow issues as a result of COVID-19 restrictions.
The R1,2bn injection will allow the group to repay corporate debt; meet its BEE funding and other obligations, and generate sufficient working capital to fund its cash-flow shortfall as well as create debt capacity and a flexible capital structure to position the company for future growth, City Lodge said in a statement.
The step is prudent given the “extreme uncertainty facing the company and the losses currently being incurred due to COVID-19, the associated lockdown and travel ban, and furthermore, given that it is not yet known when our hotels can reopen and return to above breakeven occupancy levels, together with the high level of debt on the City Lodge balance sheet,” the group said.
Following the nationwide lockdown, effective midnight March 26, City Lodge closed all of its 55 hotels in South Africa. As of June 12, two hotels are serving as quarantine hotels and 21 (including two non-South African) hotels are open for stranded guests, essential services and business travel accommodation requirements, “albeit at limited/low occupancies”, the group said.
