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SkyCity seeks funds for Adelaide upgrade

Business

Casino operator SkyCity is going to its shareholders in a bid to raise $A241 million to help fund the expansion of its Adelaide Casino and a hotel project in Auckland.

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The New Zealand-based company told the ASX today that it was still “committed” to the $300 million Adelaide expansion, which includes a boutique hotel at the Riverbank end of the casino.

However, it was seeking funds to pay down debt and maintain its credit rating.

SkyCity has requested a trading halt in relation to the capital-raising until next Monday (May 16).

The funds will also go to towards a new hotel project in Auckland, after SkyCity decided against selling the asset.

In its statement to the ASX, the company said main construction of the Adelaide expansion was expected to begin in the second half of 2017, with completion now expected by late 2019 or early 2020.

Early works, in conjunction with the State Government, were expected to begin in the second half of this year.

The statement said that Walker Corporation was making “good progress” on its redevelopment of the Festival Plaza, which includes 750 car park space to be allocated to Adelaide Casino.

Walker was “close to finalising its development agreement with the SA Government”.

SkyCity aims to raise the new equity from eligible shareholders through a fully underwritten accelerated pro-rata entitlement offer.

The equity raising is expected to be completed by mid-June, the company said.

SkyCity’s offer is one new share for every 10 held at a price of $NZ4.40 each, a 12.8 per cent discount to the five-day volume weighted average price of $NZ5.04 as at May 10.

“SkyCity intends that the net proceeds from the offer will be used to repay bank debt and reduce gearing, in order to support the funding of future capital expenditure commitments in Auckland and Adelaide,” the company 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.”

SkyCity has been seeking buyers for its Hobson Street hotel in Auckland, but decided to retain the asset after rejecting offers it viewed as below-par. Construction of the hotel began last year and is expected to be completed in the first quarter of 2019.

The company expects the share offer to be fully subscribed but points out that, in any case, it is fully underwritten by Credit Suisse and First NZ Capital.

SkyCity has been through significant changes recently with chief executive Nigel Morrison leaving at the end of April.

In this resignation statement, Morrison said the $300 million redevelopment in Adelaide was one of the factors that would underwrite the company’s future growth.

Designs were approved in January, and the company told the ASX today that it continued to believe in the future growth potential of the Adelaide Casino following the expansion and development of the Riverbank precinct.

The redevelopment plans include high-end spa facilities, premium gaming space – including suites for international VIP players – and an 80-room luxury hotel overlooking the Torrens.

Separately, the casino company said revenue on a normalised basis increased 11 per cent to $NZ916.9m 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 per cent to $NZ523m.

In Australia, revenue at its casinos in Darwin and Adelaide slipped 1.7 per cent to $A225.5m, although they recorded a gain of 0.6 per cent in New Zealand dollar terms.

– with BusinessDesk

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