Sky City placement gets $2.61 a share

Sky City Entertainment Group's institutional placement of 71 million shares was made at a price of $2.61 per share, which the company said was at the top end of the book-build range.

Sky City today said it raised $185.3 million in the placement, for which the shares were fully underwritten at $2.52 each, a discount to their last trade at $2.85.

Managing director Nigel Morrison said the company was pleased with the result which endorsed Sky City's capital management initiatives.

"We achieved strong support from existing institutional shareholders in New Zealand and Australia and significant interest from a range of major international institutional shareholders," he said.

A trading halt on the company's shares, put in place yesterday to allow the placement to be carried out, was lifted before the sharemarket opened today.

Sky City is the latest in a list of strong companies, including Freightways and Fletcher Building, that have recently come to the market to raise capital as bank funding becomes increasingly difficult and expensive to obtain.

"Sky City probably doesn't need too much in the way of capital, it's been managing its capital very well," said Paul Richardson of Sky City shareholder BT Funds Management.

First NZ Capital analyst Rob Bode said Sky City had formed the view it was too highly geared for the current environment.

"That part makes sense," he said, but he questioned how the company would reduce debt when it did not have any due until May next year.

The money would likely end up sitting in cash which could have an impact on the earnings per share, said Bode.

Sky City's Morrison told the New Zealand Herald the extra capital would allow the company to reduce its gearing level to 2.5 times earnings before interest, tax, depreciation and amortisation, from 3.1 times now.

That would make the company more attractive to some investors who had been put off in the past.

Sky City, which had $964m in debt due over the next 10 years, would also be able to reduce net debt.

"It will give us the opportunity to talk to some holders of debt and manage it," he said.

The company is also hoping to raise up to $35m in a share purchase plan for existing shareholders.

- NZPA