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SkyCity offers to sell $263M of shares to fund Auckland, Adelaide expansion

Wednesday 11th May 2016

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SkyCity Entertainment Group, New Zealand's only listed casino company, plans to raise $263 million by selling new shares to existing investors, enabling it to keep its debt in check and maintain its credit rating while funding expansion in Auckland and Adelaide.

The Auckland-based company is offering to sell its investors one new share for every 10 held, at a price of $4.40 apiece, a 12.8 percent discount to the five-day volume weighted average price of $5.04 as at May 10, it said in a statement. 

SkyCity has been exploring ways to finance major property development projects, including a 5-star hotel and convention centre in Auckland, and a redevelopment of its Adelaide casino, while keeping its debt at the level needed to retain its BBB- credit rating with Standard & Poor's. It decided against selling its planned Auckland hotel after failing to attract high enough bids and has nixed the prospect of selling other assets, changing its dividend policy, or issuing hybrid debt.

"SkyCity has concluded that undertaking the offer to raise new equity is the best option for the company and its shareholders, and expects that this will underpin the funding plan for its two major growth projects in Auckland and Adelaide," it said in a statement. "The offer is expected to provide sufficient funding capacity and headroom for SkyCity to fund its major growth projects, maintain its BBB- credit rating and allow it to continue to invest prudently in the business."

The offer is expected to be completed by mid-June and the company anticipates existing debt facilities should then be sufficient to meet future funding requirements out to the middle of its 2018 financial year. It has $640 million of debt facilities due to mature between now and the end of its 2020 financial year and intends to secure additional debt funding through extending or increasing its existing bank facilities, issuing New Zealand bonds, or replacing existing US private placement notes with further issues.

The offer is fully underwritten by First NZ Capital Securities and Credit Suisse (Australia).

Separately, the casino company said revenue on a normalised basis increased 11 percent to $916.9 million in the first 10 months of its financial year through April 30. Its New Zealand casinos in Auckland, Hamilton and Queenstown lifted revenue 7.7 percent to $523 million. In Australia, revenue at its casinos in Darwin and Adelaide slipped 1.7 percent to A$225.5 million, although they recorded a gain of 0.6 percent in New Zealand dollar terms. Revenue for its international business unit, which attracts high-roller gamblers, advanced 50 percent to $146.4 million on a normalised basis, it said.

The company's stock is rated an average 'buy' according to the average recommendation of 11 analysts compiled by Reuters. The shares, which are halted from trading during an institutional bookbuild, last changed hands at $5.01 and have gained 13 percent this year.

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