appConfigEntityId

bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

hooksArticlePageAdvertisementConfigArticle

liveArticle

appConfig

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

sectionsV2

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

json

Sandy Li

Luxury hotel group Shangri-La Asia plans a rights issue to raise about HK$4.69 billion  to settle a substantial portion of its bank loans amid speculation of a rate rise next year. 
It plans to use HK$4.62 billion of the proceeds to repay debts. By selling shares to  existing shareholders at a discount, the company said it would save interest costs. 
The rights issue comes amid anticipation that Beijing will next year raise lending and deposit rates, which have been kept low since the global financial crisis hit.
According to its latest interim report, Shangri-La Asia has a total of US$2.54 billion in outstanding loans, of which US$446.84 million or 17.54 per cent is denominated in yuan. 
Another 44 per cent of its loans are denominated in Hong Kong dollars. Net finance costs for the six months to June surged more than 96 per cent to US$21.32 million from US$10.84 million a year ago.
'The rights issue will improve its gearing and allow room for faster unit growth via additional land or project acquisitions,' said Justin Kwok,  in a Goldman Sachs research note. After the debt repayment, Kwok said, Shangri-la Asia's gearing ratio would drop to 25 per cent from 39 per cent.
Kwok  said the rights issue would allow the company to accelerate its current pace of 10 per cent growth in rooms per year, capitalising on the mainland's burgeoning hotels sector.   
Shangri-La's recently released hotel operating performance was very strong in the region, he said. 'We expect the ongoing robust lodging demand to allow hotel operators to hike their rates amid cyclically high occupancies.'  
 But shares in Shangri-La Asia  fell 3.96 per cent to close at HK$19.88 yesterday after the company said it would issue between 240.69 million and 241.67 million rights shares,  with one rights share for every 12 shares at HK$19.50. The subscription price represented a discount of 5.8 per cent to the closing price of HK$20.70 before trading  was suspended on Thursday.
The rights issue came after the counter climbed to an intraday 52-week high of HK$20.95 before closing at HK$20.70 on Wednesday. Shangri-La Asia shares have risen 41.8 per cent so far this year.
'It showed the management believed now is a good opportunity to capitalise on the sharp rise in its share price,' said Donald Cheng, an analyst at Haitong International Securities.  
Shangri-La Asia said in a statement it would  gradually draw down bank loans to fund its ongoing hotel expansion programme, primarily  on the mainland.
Shangri-La is   developing hotels and other mixed-use projects in various mainland cities, and is considering proposals to expand to others   as well as the Asia-Pacific.
The last time Shangri-La Asia raised equity, in the middle of 2007, was also by way of a rights issue at HK$18 per share to generate net proceeds of HK$5.2 billion. The cash call was  aimed at meeting  its HK$14.5 billion capital expenditure  needs  that year. Shangri-La is part of the Kerry Group, which publishes the South China Morning Post.
Clear the debts
Shangri-La Asia is developing hotels across the mainland
The luxury hotel group plans to use this much, in HK dollars, of the rights issue proceeds to repay its bank loans: $4.6b



Shangri-La targets HK$4.7b in rights issue