Jan 17, 2013 (LBO) - Sri Lanka's Hotel Services (Ceylon) Plc, has sought shareholder approval to increase borrowings after the cost of renovating its 'The Kingsbury' branded property escalated.
The company had funded a 2.4 billion rupee renovation and expansion with a 1.3 billion rupees term loan arranged in December 2012 and short term loans, the company said in a circular to shareholders.
A second loan of 1.3 billion rupees or its US dollar equivalent was being negotiated to settle short term borrowings. The directors told shareholders another 235 million rupees would be needed for working capital increasing proposed borrowings to 1.53 billion rupees.
The company's articles of association limited borrowings to 50 percent of assets. By October 31, 2012 the last audited balance sheet date, the threshold was 1.9 billion rupees.
With the company's assets at 1.9 billion rupees as at March 31, 2011 directors needed ratification to borrow 231 million rupees which exceeded 50 percent of assets, as required by the articles of association.
Directors were seeking shareholder approval through an extraordinary general meeting to borrow 1.53 billion rupees, exceeding the 50 percent asset threshold by 1.19 billion rupees.
The company said in March 2012 it estimated the refurbishment cost which increased rooms from 189 to 229, to be 1.8 billion rupees.
Following design changes which required an additional 600 million rupees the cost escalated to 2.4 billion rupees. The renovation had also involved replacing its older mechanical and electrical systems giving energy savings.
Hotel Services owns Sri Lanka's oldest five star hotel, first operated by the Inter Continental chain. The Kingsbury has been renovated to have a British Colonial period style. The hotel is located in the Colombo's colonial quarter.
source - www.lbo.lk
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