NSSA okays US$10m loan to RTG

has been concluded and disbursements would start before the end of this month or early next month. RTG’s short-term debt is about US$14 million. A further US$4,5 million would be raised through a rights offer and shareholders seem to have agreed to support the cash call.
“In terms of retiring the debt, the group has successfully concluded a US$10 medium-term loan with NSSA,” said a source at RTG who asked not to be named.
“With the short-term debt currently standing at about US$14 million, the group intends to raise additional money through a rights issue to settle the balance of the short-term loan.”
RTG acting chief executive Mr Pascal Changunda said in an interview this week the hospitality group was looking at various options to retire its short-term debt.
“Various ways are being looked into and an announcement would be made shortly,” he said.
Apart from the short-term debt, the group has a medium-term debt of US$10,7 million with Africa Export and Import Bank (US$7,5 million) and PTA Bank (US$3,2 million). Net gearing for RTG stood at 73,2 percent in six months to June, meaning the level of debt, although improved from 99,6 percent in the same period last year, is still high.
In a research note on RTG in August, Imara Edwards Securities downgraded its hold recommendation to sell, saying the hospitality company remained undercapitalised and failure to recapitalise could leave it in a precarious position. The group has borrowed since the adoption of the multi-currency system, mainly to finance operations and fund refurbishments. Progress has been made at some operations, with Rainbow Towers, its flagship, expected to be completed by January next year.
Refurbishment of A’Zambezi Lodge in Victoria Falls has been completed and has been upgraded as a four-star facility. Other properties to be upgraded and refashioned include Bulawayo Rainbow Hotel, Kadoma Hotels and Conference Centre and Victoria Falls Rainbow Hotel.
The construction of a 140-room hotel in Beitbrigde is nearing completion and may open doors next January, the company said in August.
With regards to the sale and lease-back transaction of Bulawayo Rainbow Hotel with NSSA, the deal is yet to be concluded. RTG disposed of Touch the Wild Safaris and Tourism Services Zimbabwe for US$900 000. The disposal of Matetsi Water Lodge is expected to be completed this year, realising US$1,6 million.
Analysts say the level of the net gearing meant recapitalisation of the group was long overdue.
The sale of Bulawayo Rainbow Hotel was meant to raise money to partly recapitalise the group but the problem has been the unwillingness by Mr Nick van Hoogstraten, a 36 percent shareholder, to back the move.
The British property tycoon had also problems with management on previous recapitalisation of the group
RTG has operations in Zimbabwe, Mozambique and Zambia. For six months the group reported a weak set of financials, led by the high operating and finance costs as well as poor performance by discontinued operations.
A 14 percent growth in average revenue per room supported the 5,7 percent increase in turnover.
Occupancies eased to 39 percent from 41 percent. The increase in conferencing business anchored ARR growth. Margins were pressured mainly due to high staff and utilities costs. Cash flows were strained with negative net cash generated from operations.