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Current as of 07/12/16 06:59AM NZST
Property editor of the NZ Herald

Experts applaud SkyCity plan

Capital raising of $263 million will address debt issues while firm retains new hotel.
SkyCity will keep hold of its yet-to-built hotel on Hobson St.
SkyCity will keep hold of its yet-to-built hotel on Hobson St.

Finance experts have voiced support for SkyCity Entertainment Group's $263 million capital raising plans announced yesterday, saying it addressed the company's debt issues.

Shane Solly, Harbour Asset Management portfolio manager and research analyst, said the business could have sold assets, raised money or both.

"We are not surprised to see the capital raising. SkyCity's debt levels are creeping up with development activity so it makes sense for the SkyCity board to be raising new equity. Some investors may have expected asset sales instead of or as well as an equity raise," Solly said.

Chris Gaskin of Devon Funds praised the deal.

"They maintain ownership of what will be a core business asset - the Hobson St hotel - and also de-risk the business and reduce gearing by taking advantage of a healthy share price. Very smart," Gaskin said.

SkyCity's capital raising plan is to sell new shares to existing investors. It also said yesterday that it would keep its yet-to-be-built Hobson St hotel as part of the NZ International Convention Centre.

An NZX notice explained the move, saying the company plans to raise the money through a fully-underwritten, accelerated, pro-rata entitlement offer.

"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," the company said.

"This follows the conclusion of the sale process for the Hobson St hotel and SkyCity's decision to retain the asset," it said.

Australian-based real estate agents were engaged to try to sell the hotel in an international marketing campaign, for a price expected to be above $100 million.

"The offer provides an equal opportunity for all eligible shareholders to participate in the equity raising and is expected to be completed by mid-June," SkyCity said.

Shareholders are entitled to buy one new share for every 10 existing shares.

The company anticipates existing debt facilities should then be sufficient to meet future funding requirements through to the middle of its 2018 financial year.

It has $640 million of debt facilities due to mature by 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.

- NZ Herald

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