The company, in a trading update, revealed it owns freeholds for its hostels in Glasgow, Pisa and York and these assets could be sold in either lease-back or straight disposals.
It additionally said it may contemplate early terminations for leases that are expected to generate losses in the coming months, subject to striking agreements with the relevant landlords.
The company confirmed that at the end of August 18 it was £900,000 overdrawn and the remainder of its £5mln facility with HSBC remains undrawn. It is presently pursuing additional cost savings including seeking further rent reductions (following prior £400,000 rent relief granted for the between April and July).
Safestay added that it remains confident of securing additional funding to continue to support the business and emerge as one of the winners post the pandemic.
“The board is considering a range of options in relation to the business, including raising equity, but the board is mindful of giving all shareholders the opportunity to participate in any such equity raise,”
“This is a challenging period but I am confident that in time we will get back to normal,” said Larry Lipman, Safestay chairman.
“We are working closely on a range of options to strengthen our financial position, which may not be required but will be an additional comfort to have.
“We know we have a good cash generative business and while the current market is challenging we have a clear strategy for addressing it and as importantly for moving back to being fully operational.”
In its trading update Safestay revealed two models of upcoming trading which describe its outlook – a base case and a low case.
In the base case, it is envisaged that all hostels are reopened by October 2020. It assumes an occupancy rate of c25% for open units across the months of August and September followed by c30% occupancy in the fourth quarter of 2020 and 40% occupancy in January and February.
The low case, meanwhile, sees the London Kensington Holland Park and Barcelona Gothic hostels remain closed until 2021 but the remainder of the portfolio all open from October. It anticipates 20% occupancy for August and September, before receding to 15% alongside a ‘second wave’ of infection during the fourth quarter and 25% occupancy through January and February 2021.
Safestay noted that its hostels breakeven at an average occupancy rate of around 57%, and, both the base and low case outlook anticipates this would be reached by March 2021.