Suntrust Resort Holdings Inc, the subsidiary of Hong Kong’s LET Group Holdings currently developing a US$1.1 billion hotel and casino in Manila’s Entertainment City precinct, has entered into a series of refinancing agreements with Summit Ascent Holdings.
According to information filed by Summit Ascent on Thursday morning, the agreements include a new loan agreement under which SA Investments will provide a loan facility to Suntrust of up to US$20 million, pending shareholder approval.
The loan facility relates to a requirement for Suntrust to maintain a credit balance of no less than US$20 million in a construction reserve account to cover any cost over-runs in the construction of the Manila hotel and casino.
Summit Ascent, whose primary interest is a controlling stake in Russian casino Tigre de Cristal, will also subscribe to Php13.5 billion (US$248 million) in new convertible bonds, with the subscription price to be set off against the sum of convertible bonds Summit Ascent subscribed to in 2020 and 2022. The new agreement will also set off interest owed under those 2020 and 2022 convertible bonds agreements, with Suntrust having failed to meet interest payment obligations for the 2020 convertible bonds on 30 December 2022 and on the 2022 convertible bonds on 10 June 2023.
Summit Ascent said the offset amounts, which include both the principal amount and accrued interest, total Php6.19 billion (US$113 million) for the 2020 convertible bonds and Php6.85 billion (US$126 million) for the 2022 convertible bonds.
Summit Ascent said in its filing that the agreements constitute a connected transaction given that LET Group – formerly known as Suncity Group – holds a 51% stake in Suntrust and a 69.66% stake in Summit Ascent. Should Summit Ascent choose to convert all bonds it now holds in Suntrust, LET Group’s deemed stake in Suntrust would increase to 86.4%.
Explaining the reasons for providing this latest financial assistance, Summit Ascent said Suntrust’s failure to effect payment of interest due under the 2020 and 2022 convertible bonds may deter other investors from providing funding for the remaining capital expenditure needs for the development of the Manila hotel and casino at Westside City, which may significantly postpone its completion and opening.
As such, while the new convertible bonds agreement represents a 38.9% discount to the 2020 convertible bonds conversion price and 33.3% discount to that of the 2022 convertible bonds, they are also seen as “increasing the prospective long-term value and return of the Group’s investment in Suntrust and the potential equity stake of the Group in Suntrust upon the eventual opening of the Main Hotel Casino, with the number of potential Conversion Shares increased by approximately 75.0%.”
On the progress of the Manila development, Summit Ascent explained that Suntrust has so far paid 42% of the estimated total construction and development cost.
“The Suntrust Group is also starting the employee recruitment process for the Main Hotel Casino’s operations team,” it said.
“If SA Investments does not restructure the payment obligations with Suntrust, the Loan Facility would be adversely affected and Suntrust may not be able to secure adequate funding for the Main Hotel Casino.
“As a result, the Group is unlikely to be able to recuperate its investment in Suntrust. Facilitating the completion and opening of the Main Hotel Casino is essential to the Group securing a return on its investment.”
