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Almost two years ago, Enjoy was celebrating after sweeping the municipal casino tender and keeping four of the five squares in dispute. And it is that in addition to maintaining the administration of the casinos of Viña del Mar, Coquimbo and Pucón, it snatched from Sun Dreams, its main competitor in the industry, that of Puerto Varas. Advent’s entry into the property of the casino and hotel chain was key to leaving the company in a better financial position and managed to change the rhythm of the country’s main casino operator.
But today the scenario for the country’s main casino operator is completely different. This Friday, Enjoy announced the start of a judicial reorganization process, seeking to avoid bankruptcy due to the complex financial situation it is going through, considering the expected flows for the coming months and the payment schedule to its creditors.
Through an essential fact, the company stated that the effects of the 2019 social outbreak, and then the current health crisis, had a profound impact on the company. These two situations, said Enjoy, “made the cash flow necessary to maintain the operation be totally limited.”
Following the Covid-19 pandemic, the Superintendency of Gambling Casinos (SCJ), ordered Enjoy – and the entire industry – to close all its casinos for an undetermined time, starting on March 18 and until the health authorities so determine.
On the other hand, its international operations – Punta del Este, in Uruguay, and Mendoza, Argentina – as well as all the hotels, are also closed for an undetermined time, which means that the company is not receiving revenue at the moment.
But the reasons that Enjoy provides to justify this measure also date back months. The company maintains that the tourism, hospitality, gastronomy and gaming casinos industry were one of the most affected by the social outbreak and forced them to forcefully close the casinos for several days, and then to a subsequent intermittent and partial operation. The situation, also, assures the firm, generated extraordinary and unforeseen costs and expenses and a general drop in the flow of visits.
“These effects have generated a strong financial impact, reflected in losses in business results during the last quarter of 2019,” said the firm, whose numbers only worsened in the following months. “So the normal conditions, which are an absolute necessary for the correct execution of the company’s business plan, are not present, and we do not know for how long or in what depth,” the firm told the Commission for the Financial Market.
In 2019, Enjoy decreased its sales by 4% to $ 264,086 million, and recorded losses of $ 27,707 in the same period, which deepened in relation to 2018, when it recorded losses of $ 25,020 million. In a presentation to investors that the company made on March 27, it quantified at $ 7,556 million the impact of the social outbreak in Ebitda in the fourth quarter.
For the judicial reorganization process, which has already started, Enjoy is being advised by Estudio Nelson Contador & Cía.
In recent times, the company was in talks with its various creditors to try to obtain solutions. Enjoy indicated that “although it has found an echo in some of them, it has found reluctance in others, all of which threatens the proper use of the company’s cash and the equality of creditors under the law.”
After the decision was communicated to the market, Enjoy stated that “the company has made the determination to initiate a judicial reorganization procedure for its parent company, as a serious and responsible measure to guarantee the continuity of its operation, protect jobs and payment to its suppliers in the country ”.
During the morning of this Friday, and without access to outsiders, the firm held its ordinary shareholders’ meeting remotely. However, the extraordinary meeting, which was also scheduled for Friday and in which a capital increase of up to US $ 150 million – which had been announced on March 26 – would be approved, was suspended. As pointed out at the time by Enjoy’s general manager, Rodrigo Larraín, the capital increase sought to “cement the growth path” that had been outlined “and that outside the contingency periods that we have lived it begins to show the expected results”.
In December, the bondholders had already accepted the request to modify the covenants of the company’s local bonds in consideration of the expected impacts of the social outbreak. The company had also resorted to a plan to refinance its debt with resources from the sale and lease of the real estate assets of Antofagasta, Pucón and Coquimbo, for which it had hired the advice of Credicorp Capital.
In the midst of the pandemic, it also applied measures such as reducing salaries for its top managers and executives for a fixed period. In addition, it made layoffs that covered all areas of its operations.
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