Sky City joins corporate tapping investors with $228.9M offer

Wednesday 22nd April 2009

Sky City Entertainment, New Zealand’s biggest casino company, is the latest listed company seeking additional capital to cushion against economic conditions, with plans to raise up to $228.9 million in a share placement, share purchase scheme and top-up offer.

Trading in Sky City shares was halted for the placement of 71 million shares at a discount of up to 14% on Monday's closing price of $2.85. A bookbuild under way today offers the new shares at three price levels - $2.52, $2.55, and $2.58, underwritten at the lowest price, the company said in a statement.

Up to $35 million will also be sought by offering shares to Australasian shareholders, at a discount reflecting the lower of the placement price and a 2.5% discount to volume-weighted average price (VWAP).

For a small number of eligible shareholders who would otherwise suffer a dilution as a result of the placement, up to $15 million in shares will be offered through a top-up scheme.

Sky City said it expects net profit for the 12 months to March 31 to fall comfortably within the consensus forecast range of $99 million to $106 million. It says the capital-raising is to achieve three key aims:

    * Improved credit metrics: net debt to EBITDA reduces from 3.1 times to 2.5 times; gearing reduces from 39.1% to 31.5%. Although the company is well within existing banking covenants on current ratios, it is seeking an upgrade from its current Standard & Poors BBB- investment grade rating;
    * Increased financial flexibility in uncertain economic times;
    * Reduced refinancing risk as the company contemplates debt rollovers totalling $786 million between 2010 and 2012, including $485 million in US private placement funds in 2012.

Sky City's move follows similar issues recently by Fletcher Building, Nuplex Industries, Freightways, and Kiwi Income Property Trust, all seeking to strengthen their balance sheets while interest rates are at historically unattractive levels for investors.

While Sky City's balance sheet was sound and its debt structure well diversified, “we have determined that it is prudent to proactively strengthen the company's capital structure and enhance its financial flexibility through an underwritten placement,” chief executive Nigel Morrison said.

Sky City took the opportunity to update on its performance for the first nine months of the financial year, saying that while group revenues were up 4.3% on the same period a year earlier, normalised EBITDA for the nine months was down 1.1% at $219.1 million.

Prior to normalisation, EBITDA dropped in the first nine months of the year to $215.9 million, compared to $233.3 million in the previous corresponding period.

Australian revenues rose 7% for the nine months, while New Zealand was proving “resilient.” The group continued to focus on cost control and operational efficiency and remained cautious on the outlook for the balance of the financial year, profit forecast notwithstanding.

At $2.52, the placement is pitched at a 14% discount to its closing share price of $2.85 on April 20. Sky City shares have traded as high as $4 in the last year, and as low as $2.50 in the past six weeks, before rebounding ahead of the most recent announcements.

Shareholders in New Zealand and Australia will be able to participate through an offer of up to $35 million in new shares, rationed to applications of up to $12,500 and A$9,000 respectively.

The further Top Up offer will be for a maximum of $15 million and will only be offered to the extent that the SPP is not fully subscribed, Sky City said.

Businesswire.co.nz

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