Weighed down by Playa, Sagicor X Fund reports $4b loss
Sagicor Real Estate X Fund Limited posted nearly $4.5 billion in losses for the March first quarter, mainly due to a write-down of the value of its investment in the Playa Hotels & Resorts chain.
The company cited the COVID-19-induced shutdown of hotels in global markets as the reason for the write-down, or impairment, which amounted to $3.9 billion.
X Fund also recorded lower revenue in the quarter of $1.3 billion, down from $1.8 billion in the comparative period in 2019, while the $4.47 billion of net losses eviscerated a profit of $1.03 billion a year earlier.
The coronavirus outbreak resulted in the stalling of the international travel, causing a sharp drop in tourism activity and significant loss in revenues for hotels worldwide. The Jamaican tourism market shut down shortly after the first local case was detected on March 10, and just began reopening on Monday, June 15.
“These factors, coupled with the high level of uncertainty surrounding the virus, triggered the impairment assessment,” the company said in its first-quarter earnings report.
Sagicor X Fund is the second-largest shareholder in Playa Resorts, which operates all-inclusive hotels in Jamaica, the Dominican Republic and Mexico.
X Fund, which itself owns hotel assets directly, made a loss of $77 million for the full financial year in 2019. The March quarter was a worsening of that performance, and the company is cautious about what the rest of the year will bring.
Citing recent research from the World Tourism Organization indicating that “100 per cent of global destinations continue to have restrictions on travel in place, and 72 per cent have completely closed their borders to international tourism”, X Fund said it was hopeful for a rebound in business later this year but cautious that global economic conditions may not improve in coming months to deliver that outcome.
Still, the company reported that its directly owned hotel properties – Jewel Grande Montego Bay and DoubleTree by Hilton in Orlando, Florida – performed well considering the impact of the virus, with occupancy levels of 70 and 77 per cent, respectively, during the quarter. Jewel Grande turned around a loss to a profit of about $40 million, while DoubleTree’s profit ticked down to about $110 million.
The impairment charge on the Playa investment contributed to a reduction in Sagicor X Fund’s capital base in March to $32.5 billion from $36.5 billion at year ending December 2019.
Sagicor Group Jamaica, the parent company for Sagicor X Fund, said in a statement that Playa recently raised US$224 million to be used for working capital and paying down debt. It includes borrowings of US$204 million – a US$94-million credit facility maturing in April of 2024; and a US$110-million property loan maturing in July 2025 and secured by the Hyatt Ziva & Zilara Cap Cana and the Hilton Rose Hall hotel properties. Both loan facilities were priced at 9.25 per cent. Some US$34 million will go towards the Jamaica hotel and US$76 million for the Dominican Republic.
“With this additional financing significantly improving Playa’s liquidity profile, and only US$85 million in debt maturing in 2022, we look forward to delivering excellent service from the heart and taking market share in the new travel landscape,” said Playa Chairman and CEO Bruce Wardinski in a release. “Our ability to access the capital markets is a reflection of the ongoing investor support and our commitment to driving superior returns.”
Sagicor Group said Playa raised the rest of the funds from the sale of US$20 million worth of its shares in a private transaction, the details of which it did not disclose.
“This major improvement in Playa’s liquidity profile is certainly great news, and validates Sagicor Jamaica’s confidence that Playa will emerge successfully from the effects of the shutdown of tourism as the sector gradually reopens regionally,” said Sagicor Group Jamaica CEO and X Fund Chairman Christopher Zacca in a statement highlighting the US$224m financing package.