Minor International (MINT) announced on Monday its plan to raise a total amount of 25 billion baht in capital.
The capital will be raised through perpetual bonds and a rights offering with three-year warrants. It will be completed between 2020 and 2023.
The move came after they reported a net loss of 1.77 billion baht in the first quarter of 2020 due to the impact of the coronavirus pandemic.
In comparison, they reported a profit of 583 million in the first quarter of 2019.
“I am very confident that this comprehensive capital raising exercise will strengthen MINT’s ability to continue to grow sustainably,” Dillip Rajakarier, MINT’s Group CEO said in a statement.
“Our interest-bearing debt to equity ratio is expected to come back down to 1.3 times by the end of [2020], significantly below the debt covenant of 1.75 times.”
MINT said its performance will likely be worse in the second quarter due to the temporary closures of hotels and restaurants that began in March. Their priority is to “preserve cash flow and liquidity.”
The group’s cash flows are being reduced across all three business units and geographies. Dividend payments and capex investments have also been suspended.
The capital increase program includes the issuance of 10 billion baht equivalent in onshore and offshore equity bonds which are expected to be completed in the third quarter of 2020.
The rights offering, which expects to raise 10 billion baht in capital, is expected to be completed in the third quarter of 2020.
Lastly, warrants to raise additional equity worth 5 billion baht will be issued after the rights offering transaction is completed, with a tenure of three years from the issue date.
The exercise price of the warrants comes with a premium of no more than 10 per cent of the market price in the early third quarter of 2020.
Avin Sony, head of Institutional Sales at Asia Plus Securities, said MINT’s announcement of its capital raising program might be “too little too late.”
“It had very good opportunity to raise equity at the time of acquisition of NH Hotel Group but it went with perpetual bonds, stretching its balance sheet to the max,” he said. “Now it has to raise equity at a price which stands at near 9-year lows.”
He said a 22 per cent increase in shares would create significant dilution for the amount raised which might not be enough. However, the fact that they did opt to raise equity is the right move.
“Once the dust settles, MINT will be a much stronger company,” he said. “But with payment not expected until August, we could see share price under pressure for quite some time,” he added.
MINT operates 529 hotels and its brands are in 56 countries. It is one of Asia’s largest restaurant companies with over 2,300 outlets in 26 countries.
