Following its previous announcement on 23 December 2017, AFI Development Plc announces that its subsidiary, Sanatory Plaza LLC (“Plaza”), has received a loan from VTB Bank PJSC (“VTB”) to finance the acquisition of a 50% stake in the Plaza Spa Kislovodsk project (“the Project”) from its partner in the project, allowing the acquisition to be completed today.
The loan, in the amount of US$22.5 million, is provided in US dollars for 5 years (the term can be extended for additional 5 years subject to agreement between the parties), it bears an annual interest rate of 3 months Libor + 4.5%, has quarterly principal payments (ranging from US$260 thousand in Q3 2017 to US$822 thousand in Q3 2021), and a balloon payment of US$11.254 million at maturity. The interest is to be paid quarterly.
The loan will be used primarily to repay the outstanding debt of Plaza to the companies of AFI Development’s partner in the project, in the amount of US$16.9 million, prior to the acquisition of the equity stake. The remainder of the loan will be used to finance the acquisition itself: the 50% equity stakes in both Nuana Limited and Craespon Management Limited (which together control 100% of Plaza) have been purchased by AFI Development’s subsidiaries for US$5.6 million in cash.
The Project is an operating spa resort hotel in the Caucasian mineral waters region, in the town of Kislovodsk. It has 275 guest rooms and a gross buildable area of 25,000 sq.m.
This acquisition enables the Company to consolidate 100% of the Project, manage it at its sole discretion and consolidate 100% of its revenues. Revenue attributed to the acquired 50% stake, based on the 2015 annual results, was US$9 million. The gross profit attributed to the acquired 50% stake in the Project, based on the 2015 annual results, was US$3.9 million.
The interest and principal payments for the acquisition loan to VTB shall be provided from cash flow generated by the Project.
As a result of the transaction, finance expenses are expected to increase by US$1.17 million per annum (excluding potential forex effect). The annual incremental contribution of the acquired 50% stake in the Project to the income from hotel operations is estimated at US$9 million.