Chilean operator Enjoy has approved the issue of convertible bonds during an extraordinary General Meeting of Shareholders.
Finance Manager of Enjoy, Darío Amenábar explained that from April 1 2019 until September 30 debt holders may convert the debt into shares. In order to support this action the company also approved the issue of 1,300 million shares.
The value on the market now stands at around $50 per share. Amenábar said that the company had approved a capital increase with a minimum price of $70 per share but during the last meeting “what we approved was to lower that placement price to a price no lower than the market average, less 10 per cent,” he said. Amenábar explained that the fall experienced by Enjoy shares is attributable to the fact that Advent International had not signed an agreement with the company.
“As a result of the judicial processes surrounding the municipal licensing process, the new partner who was entering the company Advent said that this scenario generated a lot of uncertainty, so for the time being it decided not to enter the company. Because they did not sign, the price of the stock fell,” he said.
The new financing package is part of a much larger set of measures as the operator waits for the bidding process of the municipal licences to be resolved. In addition it is still unknown by which the company intends to pay the remaining debt for 55 per cent of the Conrad Casino in Punta del Este. Since December 31st the company has been accruing interest on the debt it owes Caesars.
In May 2015 it was announced that Enjoy had instructed the Bank of America’s corporate and investment banking division Merrill Lynch with the task of finding a partner to participate in its plan to keep 100 per cent of the casino acquiring the 55 per cent it currently has in Caesars Entertainment. In September after an Extraordinary General Meeting of Shareholders, Enjoy approved a capital increase which would allow its new partner, Advent International, to enter the business and develop a joint venture. However, in November it was announced that Enjoy had temporarily suspended its agreement with the American global private equity firm.
In addition the company is facing growing uncertainty regarding the future of the municipal casinos. Enjoy currently has the licence to run the municipal casino in Coquimbo, Viña del Mar and Pucón.
The Chilean Gaming Control Board (SJC) postponed the hearing for the submission of tenders for the municipal casino licences at the end of October. According to a statement released by the SJC via its website the decision was made while the court considers a number of motions put forward by investors. Investors have filed a writ of amparo – a remedy for the protection of their constitutional rights.
Operators have also pointed out a number of shortcomings as well as a lack of information when it comes to the tender process initiated by the SJC to the courts. They have also warned that the demands put on operators applying for the casino licences are excessive and would make the businesses unprofitable.
Chairman of the board of Enjoy, Javier Martínez has also urged the authorities for more clarity when it comes to the licensing process. In a letter published earlier this month in the 2016 Annual Report (a legal document required by all companies that are valued by Chile’s securities and insurance regulator) Mr Martínez, asked that the “uncertainties” which currently revolve around the bidding process be resolved.