Troubled hotel group breaks chains of debt

THE Don Group, the only listed black owned and managed hotel chain today has announced a refinancing and restructuring deal that frees it from a R105-million debt. Simultaneously, the group delivered year end - to June 30 2001- results that slashed losses, raised operating profit by 54% to R13m (2000: R8,5m) and produced a second half-year profit of R1,2m (2000: R1,7m loss) on the strength of an 8% boost in turnover to R48m (2000: R44,6m). Chairman and chief executive officer, Thabiso Tlelai, who took control of the, debt-burdened hotel group in late 1999 said: "It has been tough working towards these goals. The taste of financial freedom is very sweet after all this time." Don's portfolio of hotel properties, which had shored up the debt owed to a bank consortium, was the centrepiece of negotiations with Ellwain (Proprietary) Limited. Ellwain - whose principals are Eric and Sidney Ellerine as well as property consultant Marc Wainer - first concluded a cash deal with the bank's consortium, signed on July 22, 2001, to take over Don's debt entirely. Then, in the second part of the arms length transaction with Don, Ellwain signed a deal with Don in which the hotel group relinquished ownership of all its properties at a valuation of R105m. "The agreement is favourable to Don since the group can cancel or extend the leases and buy back any properties at a pre-determined formula, " says Tlelai. The buildings not leased by Don now provide opportunities to rent residential accommodation, according to Wainer. Hotel operations have ceased in non-performing hotels with usage transferred to Ellwain. They are: Don Gardens in Cape Town, Don Illovo, Don Rosebank I, Don Wanderers (with some suites already let as rented apartments), a Rudd Road, Johannesburg, property (also let as unfurnished apartments), and Park suite Hotel in Pretoria (which has been rented by an embassy for some years) in Pretoria. The deal is subject to approval of the JSE Securities Exchange, and to shareholders, for which a general meeting is to be called. This is expected to be a formality. Tlelai has a controlling interest of 51% and the interests of other Board directors extend majority support for the transaction to 62%. Tlelai said Don would remain listed on the JSE Securities Exchange and the Group would now consolidate the gains of improved financial performance and an unencumbered balance sheet before embarking on any plans for growth. (Adéle Mackenzie)