Management of South Shore Holdings, operator of luxury Macau hotel The 13, has warned that the company’s immediate future remains in limbo after announcing losses for the six months to 30 September 2018 of HK$442 million.
The figure, up from HK$23 million over the same period in 2017, represents an 18-fold increase resulting mainly from the increase in finance costs, depreciation and amortization charges and hotel operation expenses at The 13, which opened its doors to guests on 31 August 2018. The property has since been accepting private events and conducting training exercises for staff, who South Shore Holdings says numbered 270 as of the end of September.
However, while group-wide revenue for the six months increased by 44% to HK$4.44 billion on the back of the company’s engineering arm PYE, South Shore revealed that its total borrowings now sit at HK$4.11 billion of which HK$4.09 billion is repayable within one year. The group also has outstanding convertible bonds with a face value of HK$2.22 billion and a liability component of HK$749 million. The convertible bonds mature in February 2025.
As a result, South Shore’s current liabilities exceed its assets by HK$3.87 billion, with the company stating that it is “working to obtain further facilities in order to enhance the liquidity of the group for hotel operations.”
Of greatest immediate concern is South Shore’s bank borrowings, which total HK$2.94 billion and are now payable on demand due to the group’s failure to comply with certain covenants of the loan – namely a requirement to open The 13 by 31 March 2017.
“As at the date of this report, such extension and waiver for the non-compliance of the covenants as stated in the bank loan agreement is being processed by the bank,” South Shore said in a Tuesday filing.
While the company insists that it will have sufficient working capital to finance future operations should its short-term financing plans succeed, “the likelihood of the successful implementation of these financing plans and measures could not be determined as at the date of this report.
“These events or conditions, along with other matters … indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern.”
South Shore Holdings has yet to announce any potential timeline for an application to offer gaming, with The 13 boasting dedicated space for 66 gaming tables. Macau’s Gaming Inspection and Coordination Bureau stated earlier this year that the city’s new-to-market table allocation for 2018 has been “maxed out” under the government’s table cap.