Government, which has majority stake in Sunbird Tourism Limited, says it is ready to recapitalise the listed hotel chain, but will only do so once it is approached formally by the board.
In business, recapitalisation is a type of corporate reorganisation involving substantial change in a company’s capital structure and may be motivated by a number of reasons and sometimes to fend off a hostile takeover.
Sunbird, which listed on the Malawi Stock Exchange (MSE) in August 2002, is 71 percent owned by Malawi Government, 16.44 percent by United Kingdom-based investor Noel Hayes and 12.56 percent by the public.
Over the years, analysts have suggested the need for government to dilute its shareholding or recapitalisation to breathe life into the hotel chain which boasts of seven hotels and lodges.
Sunbird has in the recent past embarked on several projects to refurbish its establishments in Blantyre and Lilongwe with internally generated money and loans.
Treasury spokerperson Nations Msowoya said in an interview in Lilongwe on Thursday that government has officials who sit on STL board, but are yet to approach Treasury on recapitalisation.
“We are ready to recapitalise Sunbird as a major shareholder, but we can only do so once we are told the pressing needs that Sunbird wants. It is like any business, when one wants to expand you evaluate the situation and see the needs before spending,” he said.
Msowoya could not disclose how much money government will pump into STL because they do not know the pressing needs.
STL board chairperson Phillip Madinga said expansion projects as well as renovations are being hampered due to limited resources, but they continue to engage government to secure its final position on recapitalisation.
He said: “We believe it is high time government decided its intentions about the future of this key franchise for the tourism sector in Malawi because our ability to embark on new projects and refurbish our hotels and infrastructure is currently being hampered by limited funding that we can raise at a particular point in time.”
Madinga said due to lack of funds over the past few years, they have had to prioritise which projects they feel will provide shareholders the required levels of return, but also at the same time ensure that the company is able to maintain infrastructure which must not affect its ability to service clients.
He said: “Most of the projects and refurbishments we have done in the past and embarking on going forward are financed either from internally generated funds and or from expensive loans.
“We believe that recapitalisation of the business is key to Sunbird’s future competitiveness both locally and internationally. The current high interest rate environment restricts our ability to raise adequate funding for our projects,” said Madinga.
Between 2016 and 2017 STL has lined up three major projects at
Sunbird Mount Soche, Sunbird Lilongwe and Sunbird Livingstonia Beach.