(Commonwealth) _ John Keells Holdings Plc (JKH), a leading blue-chip company, has announced its largest-ever Rights Issue amounting to Rs. 24 billion. This substantial capital-raising effort is aimed at supporting the funding requirements of its subsidiary, Waterfront Properties Ltd., which is developing the ambitious ‘City of Dreams Sri Lanka’ integrated resort. The Rights Issue is structured based on one new share for every ten shares currently held, with each new share priced at Rs. 160. This move will result in the issuance of approximately 160.263 million shares, raising a total of Rs. 24.04 billion. Currently, JKH’s stated capital stands at Rs. 91.25 billion, represented by 1,502,635,957 ordinary shares.
Despite the announcement, the market reacted with some bearish sentiment. The JKH share price closed at Rs. 189.25, down by 0.9% on the day of the announcement, reflecting cautious investor sentiment amidst broader market conditions. This Rights Issue marks the highest such fundraising activity by JKH since 2013 when the company raised Rs. 23 billion. That effort included warrants which contributed over Rs. 16 billion, part of a larger Rs. 40 billion fund-raising moves, also aimed at the integrated resort project.
In addition to the Rights Issue, the JKH Board of Directors has resolved to increase the number of shares in the issue through a 1-for-10 sub-division of ordinary shares. This will take place after the completion of the Rights Issue. Following this subdivision, the total number of shares will increase to 16,528,995,520 ordinary shares, significantly expanding the company’s capital base.
The proceeds from the Rights Issue will be crucial in meeting JKH’s financing obligations. These have grown due to higher-than-anticipated equity funding requirements for the project, previously branded as ‘Cinnamon Life Integrated Resort’. This increase is necessary to bridge the impacts of delayed cash flow generation from operations, a consequence of the deferment of the project’s commencement date, including gaming operations.
JKH stated that this capital infusion would strengthen the company’s balance sheet by reducing its leverage levels, thereby providing greater flexibility for future investments. The strengthened financial position is expected to enable JKH to better navigate the financial challenges posed by the delayed project timeline and enhance its overall investment strategy.
A significant milestone for the project is the partnership secured with Melco Resorts and Entertainment Ltd., one of the world’s leading casino and integrated resort operators. Melco has committed to invest approximately $125 million in fitting out and equipping the gaming space. This partnership was finalized following the publication of regulations governing the issuance of a casino license under a structured and transparent framework. The revised licensing criteria provide a clear framework for issuing licenses with stipulated minimum investments, ensuring a long-term license for Melco as both investor and operator and for Waterfront Properties Ltd. as the landlord. This license will be valid for a period of 20 years.
The development of this new regulatory framework took time, resulting in delays in finalizing agreements with Melco. JKH noted that while this delay impacted the initial timeline for commencing gaming operations, the clarity and long-term stability provided by the new licensing framework are ultimately more beneficial for the project.
The ‘Cinnamon Life hotel, along with its restaurants and banquet facilities, is scheduled to commence operations in October 2024. The gaming operations and retail mall will become operational in a phased manner, with the overall completion of these elements targeted for mid-2025. This phased rollout is designed to ensure a smooth and efficient start to the integrated resort’s operations.
