Hong Kong-listed casino developer Shin Hwa World Ltd, promoter of Jeju Shinhwa World (pictured), a complex with a foreigner-only casino in Jeju, South Korea, has announced a proposal for a capital reorganisation and a follow-up rights issue, with the intention of raising about HKD309.3 million (US$39.5 million).
The company said in a Thursday filing that the capital reorganisation will include a share consolidation “whereby every 10 existing shares of HKD0.01 each … will be consolidated into one HKD0.10 share”.
This will be followed by a capital reduction in which the issued share capital of each shareholder “will be rounded down to the nearest whole number by cancelling any fraction of a consolidated share,” with all the credits arising from the exercise to be transferred to the “surplus account” of the company.
Based on just above 5.07 billion existing shares in issue as at the date of Thursday’s announcement, Shin Hwa World Ltd expects to generate a surplus of about HKD45.6 million from the capital reduction.
Subject to the capital reorganisation and share consolidation becoming effective, the casino firm said it plans to implement a rights issue on the basis of two rights shares for every one adjusted share held on the record date, at a subscription price of HKD0.26 per rights share.
The company said it expects to raise up to HKD263.7 million before expenses by way of issuing up to 1.01 billion rights shares. It estimates net proceeds of HKD258.6 million, according to the filing.
Shin Hwa World Ltd said SR Wealth Securities Ltd, an independent third party, was the underwriter in relation to the rights shares.
“The board considers that the rights issue represents an opportunity to raise additional funding to strengthen the group’s financial position by relieving the financial burden and provide working capital … to meet any financial obligations … without additional interest burden,” stated the casino firm in its latest filing.
Shin Hwa World Ltd said the rights issue would “enable all shareholders to participate in the future development of the company on equal terms,” as it would allow qualifying shareholders “to maintain their respective pro rata shareholdings in the company and therefore avoid dilution”.
The company stated that about HKD100 million of the estimated net proceeds would be used “for maintenance, renovation and upgrade of facilities in Jeju Shinhwa World”.
Circa HKD73.0 million will be channelled for the development of the group’s resort and gaming businesses, “such as service enhancement, supply chain management, human resources development as well as sales and marketing activities,” said Shin Hwa World Ltd.
About HKD50.0 million will be used for “interest expenses”, and the remaining HKD35.6 million as general working capital, including “staff costs, utilities expenses and other general operating expenses”.
In March, Shin Hwa World Ltd said it raised a gross amount of just under HKD28.74 million via a share subscription agreement, with about half of the proceeds to be used for “upgrade, repair and maintenance of the existing building, equipment and facilities” within Jeju Shinhwa World.
The company reported a consolidated net loss of HKD522.4 million for full-year 2023, on revenue that declined by 25.3 percent year-on-year, to just under HKD1.04 billion.
