Eden Hotel Lanka PLC, a unit of LOLC Group, is to raise Rs.4.2 billion fresh equity through a rights issue to rectify a serious capital loss, as the equity of the hotel company has eroded to less than 50 percent of its stated capital.

The shareholders’ funds as a percentage of the company’s stated capital has eroded to 40.2 percent, a stock exchange filing by Eden Lanka noted. The company said an Extra Ordinary General Meeting would be convened to notify the shareholders on the current company status.

Aimed at recouping the losses, the company proposes to issue 422.4 million new shares, which once allotted shall rank equal and pari passu with existing ordinary shares, in the proportion of four new shares for every one share held at Rs.10 per share.

The current stated capital of Eden Hotel Lanka is Rs.1.58 billion represented by 105.6 million shares, and if the rights issue is fully subscribed, the stated capital will increase by Rs.4.22 billion to Rs.5.8 billion and the number of shares to 528 million. 

The rights issue is subject to shareholder and regulatory approval in connection to listing the new shares on the Colombo Stock Exchange. 

Palm Garden Hotels and Browns Hotels and Resorts Limited, whose ultimate parent is LOLC Group, together hold 88.8 percent of Eden Lanka.

Eden Hotel Lanka share was last traded at Rs.13.

For the quarter ended June 30, 2020 (1Q21), Eden Lanka saw its net loss widening to Rs.627.9 million from Rs.424.4 million a year ago as the company top line fell 72 percent to Rs.50 million displaying the coronavirus toll on the hotel company’s operations.