Sky City gets placement away above top end of range

Wednesday 22nd April 2009

Sky City Entertainment, New Zealand’s biggest casino operator, raised $185 million selling shares to institutions above the top end of its stated bookbuild range as investors welcomed its decision to tap the market pre-emptively.

The Auckland-based casino and hotel group placed 71 million shares at $2.61 apiece, just 8.4% below its trading price before the placement.

Chief executive Nigel Morrison yesterday said while Sky’s balance sheet is sound, “we have determined that it is prudent to proactively strengthen the company's capital structure and enhance its financial flexibility.”

The shares slipped 1.1% to $2.82 today and are down 2.7% this year. Sky City is rated a ‘buy’ by four of nine analysts who follow the company, with the average amounting to an ‘outperform,” according to Reuters.

The company is forecasting forecast profit this year will be between $99 million and $106 million. Profit last year of $49.9 million included a $60 million writedown of its cinema unit.

Investors are attracted to companies “that go pre-emptively and have quality franchises, fewer competitors, a bit of scale and are competitively run,” said Paul Robertshawe, head of equities at Tower Asset Management. Tower, which is fully invested, typically sells holdings to free up funds for placements, he said.

Sky City aims to raise as much as $228.9 million in total, adding to the capital raising with a share purchase scheme and top-up offer, with details still to be announced.

In the bookbuild to institutions, it offered new shares at three price levels - $2.52, $2.55, and $2.58, underwritten at the lowest price by Goldman Sachs JB Were.

The placement, “which closed at the top end of the bookbuild range” endorses Sky City’s capital management initiatives, with “strong support from existing institutional shareholders in New Zealand and Australia and significant interest from a range of major international institutional shareholders,” Morrison said today.

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.

Businesswire.co.nz

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