SkyCity Hopes to Raise $125m Via Bonds

skycity entertainment 3 new execs
New Zealand headquartered SkyCity Entertainment wants to raise $125 million via bonds and has flagged its earnings will be well below pre-pandemic levels.

NZ Herald reports the gaming, entertainment and hospitality business has released an offer document showing how it can receive an additional $50 million, taking the offer up to $175 million, if it decides to.

“SkyCity has announced an offer of up to $125 million, with the ability to accept over-subscriptions of up to an additional $50 million at SkyCity’s discretion, of six-year, unsecured, unsubordinated, fixed-rate bonds, maturing on May 21, 2027, to institutional investors and New Zealand retail investors,” it said.

The offer opens on May 10 and will close on May 14 and the bonds could get a BBB- rating by S&P Global Ratings.

“Despite positive current trading, there is no change to the previous guidance for financial year 2021, with SkyCity expecting group normalised EBITDA to be well above FY20, but still well below pre-COVID-19 and FY19 levels,” it said.

The operating environment remains unpredictable due to COVID-19, it said, citing the most recent 11-day Auckland closures in February and March.

“Accordingly, SkyCity is unable to provide formal earnings guidance at this time.

“Based on expected performance and assuming no prolonged property closures before the end of FY21, SkyCity expects to meet its financial covenants for the June 30, 2021 testing period and pay a final dividend consistent with the revised dividend policy announced at the time of its 1H21 results,” it said.

The company raised $230 million new equity from shareholders last June and July.

It gave an update on the NZ International Convention Centre project, saying there had been no material change to previous guidance on total costs, which remain at $750 million.

S&P Global Ratings said SkyCity would use the money raised to pay down drawings on its bank facilities.

Its long-term monopoly positions in its key markets, good asset quality supported by ongoing reinvestment and effective management and earnings resilience through traditional economic cycles underpin its business risk profile.

“We view SkyCity’s Auckland casino to be the highest quality asset in its portfolio and a key driver of the group’s performance.

“Furthermore, SkyCity holds exclusivity licenses in Auckland until 2048, helping it to maintain its market share.

“Tempering these strengths are COVID-19 related business interruptions to trading, execution risks association with the group’s major developments in Auckland, earnings concentration in Auckland the risks of operating in a heavily regulated industry,” S&P Global Ratings said,

The company has a market capitalisation of around $2.4 billion, net debt of $587 million and net assets of $1.5 billion.

SkyCity forbids use of junkets

Casino operator SkyCity Entertainment has followed a growing trend in Australian and New Zealand gaming operations by immediately banning junket operators for luring high rollers to its casinos.

The decision for SkyCity to suspend its international VIP operations and bring them in-house was made following the conclusion of a strategic review into the company’s International Business division last April.

The ban follows the decision by Crown Resorts to suspend its junket operations, shortly before the release of a report into the suitability of the operator to hold a casino licence in New South Wales.

In a revised operating model, SkyCity will “deal directly with International Business patrons after appropriate Know Your Customer and customer due diligence requirements are satisfied”.

William Brown

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