SkyCity seeks $216m as virus hits

Trans-Tasman casino group SkyCity is tapping the market to raise $NZ230m ($216m) as it dramatically downsizes its business.

SkyCity has also secured new debt facilities of $NZ160m and an extension of existing bank facilities of $NZ170m.

Trans-Tasman casino group SkyCity is tapping the market to raise $NZ230m ($216m) as it dramatically downsizes its business to combat the fallout from the COVID-19 pandemic.

As The Australian’s DataRoom foreshadowed early last month, SkyCity is aiming to raise $NZ180m via an institutional placement and an additional $NZ50m through a share purchase plan for retail investors.

The company’s market value has plunged more than 35 per cent this year to $1.72bn.

While SkyCity reopened its New Zealand properties, except for Wharf Casino in Queenstown, on May 14, it is yet to open the doors of its Adelaide Casino, which is scheduled to remain shut until later this month.

Like its rivals Crown and Star Entertainment, SkyCity has not only been hit hard from venue shutdowns. Travel bans have also eroded revenues, hitting the tourist trade and the flow of cashed-up Asian gamblers.

Chief executive Graeme Stephens said trading since reopening most of its New Zealand casinos had been “encouraging”, but the company remained “severely impacted” by the closures in March and April.

“Uncertainty remains regarding the future economic environment and ongoing closure of international borders,” he said.

Mr Stephens said the capital raising would ensure the company “succeeds as a smaller, domestic business in the medium term”.

SkyCity has secured new debt facilities of $NZ160m and an extension of existing bank facilities of $NZ170m. Covenant waivers have been secured from existing lenders through to June 2021.

“These measures are in addition to other company-wide savings being made in SkyCity’s operating and capital expenditure. This includes downsizing our waged workforce to ensure our business is best prepared to operate in the new environment.  “Fortunately the majority of affected employees have requested voluntary redundancy and the restructure is expected to be finalised this week.

“These have been incredibly difficult decisions to make, but we continue to be one of the largest private sector employers in New Zealand, providing thousands of jobs for a diverse range of people.”

Mr Stephens said in structuring the offer, priority had been given to ensuring existing shareholders got their pro rata share. Shares will be issued under the institutional placement at $NZ2.50 a share, representing 6.4 per cent discount to Tuesday’s closing price. Credit Suisse, Jarden and UBS are managing the offer.

The share purchase plan, which opens on June 22, will be priced at a 2.5 per cent discount to the average market price in the week before the offer closes on July 3.