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JKH to use a Dhammika licence for Waterfront casino

2013 Oct 08

JKH to use a Dhammika licence for Waterfront casino

Susantha tells shareholders they’re negotiating with two parties

Although John Keells Holdings Chairman Susantha Ratnayake told shareholders at an EGM last week that they were in negotiation with two casino licence holders to obtain an existing licence for their mega Waterfront Development project, well informed sources indicated that the only available option is a deal with Mr. Dhammika Perera.

``There are only four licences existing and Dhammika holds three. The other one is with Ravi Abeywardene who’s already committed to Packer. So JKH has no option but to work with Dhammika,’’ a source familiar with the deal said.

Ratnayake also made clear that JKH will not be running the casino themselves but will obtain the services of an international operator to run it to the highest international standards.

``We won’t be running casinos. We don’t want to; we have no expertise in that area. We will act as a landlord,’’ Ratnayake who expressed confidence in getting the use of a licence said.

A shareholder welcomed JKH’s decision not to be a direct participant in casinos saying the operator coming in can ``do what he wants.’’

``They can’t do what they want. We want the business run to the highest international standards,’’ Ratnayake responded.

In response to a question, the JKH chairman indicated confidence of their ability of servicing the present dividend level of Rs. 3 per share even after the dilution with the rights issue followed by the exercise of the warrants. He indicated that the work on the four-year project has already begun.

The decision to tie up the rights issue with warrants to be exercised down the road was to ``ease the burden on the shareholder’’ with the cash call so distributed to get the funds only as and when they are needed.

Ratnayake rejected the suggestion that he had not been sufficiently forthcoming when he was questioned about a rights issue at the previous EGM called to approve the project. What he had said then was the factual position at the time he made the statement – that the directors had not taken any decision on a rights issue.

Some shareholders said that had he indicated the possibility of a rights issue, the share price would have gone up. Ratnayake said he could not announce a decision that had not been taken by his board.

This decision was taken shortly after the previous EGM and promptly communicated to the CSE for dissemination to the market.

Although the rights issue is not underwritten, analysts are confident that it would be fully subscribed with many shareholders planning to apply for additional shares.

Ratnayake rejected published reports that JKH had sat on and earned interest on cash infused to the company at the previous rights issue presented on the basis of the need for investment capital. Of the Rs. 12.9 bn. raised then, Rs. 4.1 bn. was immediately utilized to retire existing debt.

There was also a share buyback at Rs. 90 a share - far higher than the then prevailing market price which cost JKH Rs. 2.3 bn. and substantial investments by their subsidiaries. Post the rights issue, returns to shareholders had been Rs. 15.3 bn.

Ratnayake said that reports to the contrary were ``mischievous.’’ Asked why they had not been rebutted, he said ``we can’t be rebutting everything that’s written.’’ 

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