Hong Kong-listed The 13 Holdings says work has officially recommenced on luxury Macau hotel The 13 as it races to meet a revised 31 March 2018 opening deadline. But the company’s capacity to complete the project remains in limbo while it waits for lenders to approve its application for a deadline extension.
The progress update forms part of The 13 Holdings’ revenue results for the six months to 30 September 2017, which saw loss attributable to the owners of the company narrow slightly to HK$23.6 million but liabilities more than double to HK$7.8 billion, of which HK$4.1 billion in borrowings is due within one year.
In a filing to the Hong Kong Stock Exchange, The 13 Holdings said it had prepared its consolidated revenue statements for the period after deciding it had enough working capital to continue for another 12 months, but acknowledged the “existence of material uncertainties which may cast significant doubt about the group’s ability to continue as a going concern until such time as the financing plans are completed.”
Despite the uncertainty, the company announced that the remaining fitting-out work recommenced on Tuesday, having paid deposits of HK$332 million through 30 September 2017 for “furniture, fixtures and equipment for hotel operations.” Work had previously ceased in July after The 13 Holdings missed its most recent 31 July 2017 completion deadline.
The group’s six-month financial results show current liabilities exceeding current assets by approximately HK$3.6 billion, with total borrowing having increased from HK$3.9 billion as at 31 March 2017 to HK$4.1 billion.
On 20 October The 13 Holdings announced plans to obtain financing from the proposed rights issue of between 920,867,010 and 1,048,593,270 rights issue shares at HK$1.10 per share, which would bring in at least HK$1.01 billion in proceeds.
It also announced the proposed disposal of its 51.76% interest in enginerring firm Paul Y Engineering Group Limited, which has been responsible for construction of The 13, for HK$300 million as well as a placing of loan notes with an aggregate principal amount of up to HK$740 million.
The group added that it has obtained an indicative conditional offer of a further HK$600 million of financing following the opening of the hotel.
“The group intends to use the net proceeds from the above financing plans for the working capital for the next twelve months from the date of this announcement,” it said.
The 13 Holdings outlined in October its intention to use the net proceeds from the rights issue – which would see the total issued share capital of the company increase by 50% – to settle the remaining pre-opening expenses of The 13. Those expenses include costs related to decoration, furniture, fixtures and equipment, operating supplies and equipment and other hotel operation preparation costs.
The company was previously granted a temporary HK$300 million bridging loan in December, which will also be repaid via the rights issue – itself dependent upon shareholders approving a capital reorganization of the company.
It also confirmed in October its desire to include a casino inside the hotel following recent questions over its failure so far to apply for a gaming table allocation from the Macau government.
“The company’s intention is to include gaming operations in The 13 Hotel as soon as practicable, subject to the progress of the licensed operator in submitting an application for and obtaining approval for the gaming operation after the licenses for the operation of The 13 Hotel have been granted or when it is clear such licenses are almost certain to be granted as a matter of procedure,” it said.
“The authorization to install and operate a casino in The 13 Hotel is subject to the approval of the Macau Government and therefore its success remains an uncertainty. However, the company would like to reiterate that although it is the company’s intention to include gaming operation in The 13 Hotel, it is subject to, among other things, the entering into a formal agreement between the company and the licensed operator and the approval of the Macau Government, and as such, gaming operations may or may not commence at The 13 Hotel, but will not affect the opening and the hotel operation of The 13 Hotel.”
The 13 Holdings said it had entered into a Memorandum of Understanding (MOU) with an affiliate of a Macau concession or sub-concession in April 2008 in relation to the management and operation of a casino proposed to be opened in The 13 Hotel. It added that the affiliate had sent a confirmation letter in November 2010 and another in September 2012, and that it expects a formal agreement to be signed subject to the licensed operator gaining approval from the government to proceed.
