Pulse changes financing strategy
The debt financing raised recently by modelling agency Pulse Investments Limited will be used only if needed, the modelling agency's chairman, Kingsley Cooper, said Tuesday.
The agency shelved a rights issue that was planned for the final quarter of 2017, saying in a market filing at the time that it would raise financing that was intended for its projects on the debt market instead.
Pulse had been targeting $500 million through the issue of additional shares, to be arranged by broker NCB Capital Markets, but opted for placement of a five-year bond of "less than $100 million", which Cooper said carried interest of "less than 10 per cent, deferred for two years".
"It's more of a standby facility, to be called on if we need it," he added in response to Financial Gleaner queries on the margins of the company's annual general meeting.
He said the expansion project at Villa Ronai and Trafalgar Road for which the funds were needed would now be done in phases with financing being sourced principally from cash flow and connected party funding.
Out of a planned new 68 rooms and suites, the first phase of 19 rooms for short-stay visitors at Trafalgar Road now has a proposed completion date of May 2018. The second phase, comprising 25 suites at Villa Ronai, should be completed in June, but Cooper did not specify a completion date for the remaining 24 suites at Villa Ronai.
The entire project was costed at around $300 million for construction and $100 million for furnishings and equipment. The rest of the funds first contemplated under the rights issue would have been used for capital support.
Cooper explained that in cancelling the rights issue, "We were thinking of short-term costs and long-term costs short-term in terms of the brokerage and other costs; long-term in terms of giving up a portion of the company".
At year ending June 2017, the value of Pulse's investment properties was estimated at $1.5 billion, amid total assets of $2.5 billion, and the company held $200 million in debt.
"Our debt is now much smaller than the amount to have been raised. If you were a shareholder and you owned 10 per cent of the company and you could not take up your rights for whatever reason, you would end up with less than you had before," the chairman said.
"Once the bond is repaid, the shareholding remains the same and you now have the asset. The bond is only a standby facility. We are generating enough cash. We anticipate using very little of it," he asserted.
Some minority owners were disappointed that the rights issue had been cancelled. Responding to a shareholder who called it a lost opportunity, Cooper, who owns about three-quarters of the company, said he was willing to trade away some of his holdings, within limits.
"I am prepared to make shares available to widen the shareholder base, but there is a limit to how much I am willing to sell," he said.