Palm Garden Hotels goes for Rs. 1.8 b rights for new hotel, retire debt

Palm Garden Hotels PLC is planning to raise Rs. 1.78 billion via a rights issue to construct a new 500 room star class hotel, and repay existing debts.
The company’s board, this week, resolved to have a rights issue of three for one at Rs. 55 per share. Given the stated capital of Rs. 651.3 million represented by 10.816 million shares, the move will result in the issuance of 32.45 million new shares.
The net asset per share of Palm Garden Hotel is Rs. 100.50 as at 31 March 2014. Yesterday the company’s share price dipped by Rs. 21.90 or 18% to close at Rs. 91 after touching an intra-day high of Rs. 110. The rights issue is subject to regulatory and shareholder approval.
In December 2012, Riverina Hotels PLC amalgamated with Palm Garden Hotels PLC with the latter as the continuing entity. The move was to optimise the use of the assets of both companies.
The planned new hotel will be built by a wholly-owned subsidiary of Palm Garden Hotels PLC with incentives granted for such a project by the Board of Investment.
As at 31 March, Palm Garden had Rs. 498.6 million in interest bearing short term borrowings whilst at group level (which also includes Eden Hotel and Dickwella Resorts) the amount was Rs. 993 million. Retained loss at company level was Rs. 665 million and at group level it was Rs. 556 million.
LOLC Leisure holds 71.4% stake in Palm Garden Hotel whilst its public holding is 28.6%.