COVID cushion: Sagicor X Fund builds up cash despite losses
Hotel investor Sagicor Real Estate X Fund Limited made losses for two consecutive years, but its cash holdings have jumped consistently over that period to record levels.
The company, which holds hotel assets, expects its revenue and asset valuations to take a hit arising from the COVID-19 pandemic; but its more than $1.7 billion in cash will likely help to cushion some of the fallout.
X Fund executives said “the liquidity levels for the group remain strong”, despite recording widening losses of $77 million for its full year ending December 2019, compared to a net loss of $15 million reported for the prior year.
Its cash grew in the year due in part to its reduction in debt financing costs and other expenses, arising from early payment of loans after selling two assets in 2018.
“Interest and other financing costs were lower by $500.6 million, as cash proceeds from the sale of Hilton Rose Hall Resort & Spa and a part of Jewel Grande Montego Bay were used to pay down borrowings and other obligations in June 2018,” X Fund said in its earnings report.
The result is that its cash and equivalents grew more than 2.5 times from the amount it held in 2016 – from $659 million to $1.76 billion in 2019. An additional $400 million held as restricted cash pushes the total above $2 billion.
The early payment of loans reduced X Fund’s total borrowing to $2.4 billion in 2019, from $4.03 billion a year earlier.
Sagicor X Fund, which owns hotel property in the United States and Jamaica and holds a stake in resort operator Playa Hotels, says it remains exposed to the potential economic effects of COVID-19, which so far has resulted in cancellations of vacations and conferences at the various properties in which it has interest, “resulting in lower revenues and depressed asset values”. Its assets last year grew from $43 billion to more than $45 billion.
“Our local hotel operation closed in March 2020, while our partner, Playa Hotels & Resorts, has also closed some of its operations both locally and overseas. DoubleTree remains opened but is experiencing some cancellations,” X Fund advised shareholders. “This virus is a global crisis and we continue to closely monitor the situation. We remain hopeful that our business activities will quickly rebound in the latter part of the year,” the company said.
X Fund is 52.73 per cent owned by the Sagicor Pooled Pension Investment Funds, which are administered by Sagicor Life Jamaica Limited. Sagicor Group Jamaica holds another 21 per cent of the company, while Sagicor Segregated Funds holds 8.09 per cent.