Credit rating upgrade for Pegasus Hotel US$30m expansion debt

A bird’s eye artist’s impression of the Pegasus Suites and Corporate Centre.

The Caribbean Information and Credit Rating Services Limited (CariCRIS) has raised its regional foreign currency rating on the US$30 million long term debt issue of The Pegasus Hotels of Guyana Limited (Pegasus) to CariBBB from CariBBB-.

CariCRIS simultaneously reaffirmed the hotel’s national scale rating of gyAA+. The Pegasus Hotel is in the midst of a major expansion at its Kingston site.

According to CariCRIS, the regional scale rating signals that the level of creditworthiness of this debt obligation, judged in relation to other obligations in the Caribbean is adequate. It added that the Guyana national scale rating indicates that the level of creditworthiness of the obligation adjudged in relation to other obligations in Guyana is high.

CariCRIS said that the raising of the regional foreign currency rating is based on its internal assessment of improved creditworthiness of Guyana’s sovereign risk over the last 12 months.

“The ratings of Pegasus are supported by the strong macroeconomic prospects for Guyana, which is expected to drive the demand for ‘Class A’ office space and accommodation that is to be provided by the new Pegasus Suites and Corporate Center. Pegasus’ strong brand equity and stable occupancy rates at its existing hotel, as well as its good financial performance with stable revenues and increasing operating cash flows, also support the ratings”, CariCRIS said.

It added, however, that the rating strengths are “tempered by the high reliance on the promoter to drive the success of the new project. The moderate project risk that characterises the new project, together with the existence of room for improvement in internal management reporting and governance arrangements, also temper the ratings”.

CariCRIS added that it maintained a stable outlook on the ratings which is based on its expectation of continued revenue and profitability growth in the hotel’s operations over the next 12 to 15 months.

CariCRIS said that businessman, Robert Badal purchased the property in 2009 through his holding company, Sahara Investment Incorporated. The holding company owns 97% of Pegasus while 3% is owned by the National Insurance Scheme.

The hotel it says currently consists of 130 rooms comprising 3 suites, 33 luxury rooms and 94 standard rooms, as well as 3 restaurants, 3 conference rooms and a ballroom.

Against the background of a growing economy and strong prospects for the development of a significant oil and gas sector in Guyana, CariCRIS said that Badal has decided to extend his market reach and leverage the strong brand equity of the existing Pegasus Hotel, to construct a Suites and Office Complex (Pegasus Suites and Corporate Centre) on lands adjoining the existing hotel. The project cost has been fixed at US$70 million with 43% (US$30 million) being acquired by way of long-term debt and the remaining 57% (US$40 million) financed by way of the promoter’s cash equity.

When the project was launched on March 9th this year, it was billed as a US$100m expansion.

At the launching, Badal said his vision for the remodelling of the area he owns near his current Kingston hotel is to have a seven-storey, state-of-the-art corporate office complex adjacent to a fifteen-storey tower offering luxury residential accommodation.  These buildings will be accommodated on the eastern part of the property.

He said that the entire complex will offer the most innovative, mixed-use facilities on par with any first world facility of the same nature but with complementary food and entertainment facilities currently offered by the Pegasus Hotel.

Facilitated through financing by Republic Bank that would see China Harbour Engineering Company (CHEC) executing construction works, the facilities will also be equipped with the latest building management systems and a curtain wall providing floor to ceiling views of the Atlantic Ocean and the city of Georgetown’s skyline.

And beginning a transition towards green energy, an initiative which he firmly advocates and  believes in, Badal said that the facility will have on top of the roof a 30,000 square feet solar panel system to power it.   The project has a  timeframe of three years where the seven-story building is estimated to be completed in the first two and half years while the high rise building would be completed in the remaining six months.

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