Reef To Announce Its Rescuer Tomorrow
Sydney Morning Herald
Sunday April 27, 1997
Reef Casino Trust is expected to formally reveal tomorrow the identity of the investor willing to pump $40 million-plus cash into the Cairns casino owner.
Stockbroking analysts believe the leading contenders are Melbourne casino owner Crown, Malaysia's Metroplex group and Queensland-based Jupiters.
The trust and its advisers have been desperately seeking an investor to satisfy bankers' demands that Reef cut its $105 million debt by between $40 million and $50 million.
An information memorandum sent to interested parties reveals that Reef has budgeted for a pre-tax loss of $521,000 for the 1997 financial year. This compares with the $12.99 million pre-tax profit forecast in the trust's prospectus.
Casino revenue is budgeted to total just $70.25 million for the 1997 financial year compared with the prospectus forecast of $100.4 million.
The information memorandum states trading results in January 1997 showed "a material lift" largely due to Chinese New Year, with general gaming revenues reaching 94 per cent of budget and revenue per visitor jumping to $36 from a range of $24 to $27 in 1996.
But a table in the memorandum also reveals there has been no revenue from junket or premium players in January. Revenue from these two sources totalled $16.4 million in the nine months to December 31, 1996, about 37 per cent of total casino revenue.
The information memorandum states junket playing at Reef had to be suspended in December because the trust was unable to access its $15 million standby bank facility which covers abnormal losses from junket gambling.
This was because the casino's performance was so poor it had breached bank loan covenants.
Reef casino opened on January 31 last year and incurred a loss of $13.8 million in its first 11 months of trading.
The operators of both Reef's casino and hotel have agreed to surrender their leases for a satisfactory exit price as part of the trust's restructure.
The memorandum states these prices are confidential but it is understood Casinos Austria wants $19 million for the casino lease and Australis Hotels wants $6 million for the hotel lease. These are considered to be optimistic expectations.
Casinos Austria, Australis and Reef Centre Management, operator of the Reef complex, "have not succeeded in creating a unified approach to marketing and managing", the information memorandum states.
"Consolidation of operating control would allow the marketing operations of the complex, including both the casino and the hotel, to be more effectively co-ordinated."
Reef units, which peaked at $1.70 in August 1994, closed last week at 14.5c.
© 1997 Sydney Morning Herald
