South Shore Holdings says it hopes to find a buyer for embattled Macau hotel THE 13 by the end of its current financial year ending 31 March 2021.
The proposed deadline comes after previous negotiations with a potential buyer to acquire 50% of THE 13 for at least HK$750 million (US$96.7 million) fell through. Instead, South Shore reported in September net losses of HK$1.02 billion (US$131.6 million) and net current liabilities of HK$4.40 billion (US$567.5 million) for the year ended 31 March 2020.
THE 13, originally envisioned as an uber-luxury hotel with space for 66 VIP gaming tables, instead opened in September 2018 with no gaming and with a number of rooms unfinished due to financing troubles – all at a cost of US$1.6 billion.
South Shore this week revealed that it is looking to sell the hotel before the end of the March 2021 financial year to avoid an Audit Modification after the company’s official auditor issued a disclaimer of opinion on its financial position, in part due to difficulties in quantifying the impact of “certain uncertainties” in providing a valuation on the hotel assets. Those uncertainties include the effects of COVID-19 but also a lack of historical performance of the hotel – which has only ever operated at partial capacity – and an absence of other hotels to compare it with.
An Audit Modification has been proposed because the auditor’s disclaimer of opinion differs from the findings of an independent auditor previously used by South Shore, which values THE 13 – including the cash-generating unit of hotel business such as hotel property, right-of-use assets, property, plant and equipment and other assets – at HK$4.1 billion (US$528.8 million).
Given such modification would kick in at the end of the current financial year, South Shore has outlined an action plan to avoid such an occurrence, with the first point being that, “the Company will continue with its endeavors to seek prospective buyers for the Hotel and execute a sale as soon as possible … within this financial year.”
South Shore also said it will “continue with its frequent communications with the bank and work with the bank on appropriate remedial measures,” after it was forced to apply to its bank for a “standstill” in April to prevent enforcement of security over THE 13 and liquidation of the company. The bank had in the preceding weeks issued a demand for immediate payment of HK$2.48 billion (US$320 million) owing under its facility agreement.