KUALA LUMPUR:Malayan United Industries Bhd (MUI), which had plans to sell the Corus Hotel Hyde Park in London, UK, in 2019, has accepted a £152.5 million term loan facility to transform the property into an upscale, four-star international brand.
According to a stock exchange filing, MUI's unit, London Vista Hotel Ltd., secured the loan from CF Hyde Park LP.
The facility, divided into four tranches, allocates £87.3 million for refinancing, £38 million for redevelopment from July 2024 to October 2025, £4.5 million for contingency, and £22.7 million for working capital.
The London hotel is undoubtedly the group's crown jewel. MUI, founded by Tan Sri Khoo Kay Peng, has owned the hotel in London's Lancaster Gate since 1997. Khoo retained ownership of Corus Hotel Hyde Park even when the group needed cash, due to his evident attachment to the property.
It was reported that an interested party had offered slightly over RM1.07 billion for the London property, which could have resulted in a gain of more than RM800 million in MUI's profit or loss statement. As of June 30, 2018, the hotel's net book value was RM256.47 million.
MUI said in the stock exchange filing that it aims to improve the hotel's competitiveness against newer and more luxurious properties amidst rising competition in the vicinity.
It said that the redevelopment is expected to significantly increase average room rates and achieve over 80 per cent occupancy, leading to a substantial boost in net operating profit post-redevelopment.
The group anticipates that the hotel's redevelopment will positively impact future earnings by increasing average room rates and occupancy levels.
The hotel's occupancy rate was 60 per cent for the fiscal year ending June 30, 2023, up from 39 per cent in the previous fiscal year.
However, the group's borrowings will rise by about RM423.7 million, potentially increasing interest expenses by about RM82.6 million for the fiscal year ending June 2025, resulting in an expected additional loss per share of 2.56 sen.
Despite this, Tranche B of the loan is projected to have a positive effect on future earnings.
The loan facility is expected to reduce net assets per share from 31 sen to 29 sen and increase the gearing ratio from 0.71 times to 1.11 times for the fiscal year ending June.
As of March 31, 2024, the group had total borrowings of RM837.84 million, with RM600.64 million in short-term borrowings, mostly in pounds (£84.03 million, about RM500.85 million).
The group also had lease liabilities amounting to £11.28 million (RM67.26 million).