Johannesburg - Peermont Global, South Africa’s third-largest casino and hotel operator, is turning to bank loans and away from the European high-yield bond market to free up cash for expanding its resorts.
It would repay e416 million (R5.7 billion) of notes due next April and unwind currency hedges by taking R5.3bn of loans, Peermont said on Sunday.
Yields on its debt have fallen 204 basis points this year to 7.8 percent on Monday, while the average rate for dollar securities of emerging market consumer companies has risen 63 basis points to 5.86 percent over the period, JPMorgan Chase indices show.
Peermont would save about R150m by going to loans, chief executive Anthony Puttergill said on Monday.
“While the high-yield bond markets are currently attractive, the biggest factor that persuaded us is the whole issue around hedging of the foreign borrowing costs,” he said. The loan deal “was significantly cheaper”.
The owner of Emperors Palace casino and hotel, near OR Tambo International Airport, sold the equivalent of $1.1bn of debt to finance a 2007 buyout led by the Mineworkers Investment Company (MIC), the investment arm of the National Union of Mineworkers. MIC’s holding in Peermont will be about 25 percent with the recapitalisation, according to the company’s statement. It was 33 percent, according MIC’s website.
South Africa’s casino industry is expected to grow by between 4 percent and 6 percent this year, according to De Wet Schutte, an analyst at Cape Town-based Avior Research. - Bloomberg