SkyCity still weighing US private placement of notes after announcing bond sale

SkyCity Entertainment Group may raise more capital selling notes in the US private placement market after completing the sale of as much as $125 million of seven-year bonds next month that it plans to use to repay bank debt.

Standard & Poor’s today assigned a BBB- rating to the casino operator’s bond sale, which is to open on Sept. 3 and close on Sept. 22. That matches SkyCity’s corporate rating, which S&P said reflected “the group’s solid market positions underpinned by long-term exclusive casino licences in its key markets, good asset quality and resilience to economic cycles.” Against that were execution risk on developments in Adelaide and in Auckland, where its earnings are concentrated, and the consequences of operating in “a heavily regulated industry.”

SkyCity had $317 million of USPP notes on issue as at June 30 and had used $384 million of its $601 million in bank facilities. Prior to announcing the seven-year bond sale, the company had flagged a possible further USPP note issue.

“We continue to explore options subject to attractive terms,” said Rob Hamilton, SkyCity’s chief financial officer. The company was also continuing to evaluate a range of property-related funding options for its two major projects, he said.

The casino operator’s indicative interest rate for the bonds is 4.65 percent to 4.9 percent. The company’s weighted average debt interest rate was 6.06 percent in financial year 2015, according to its annual results. Of that its bank facilities were at 4.4 percent and USPP notes were at an average 5.31 percent.

The first tranche of SkyCity’s USPP notes, $40 million, come due in 2017 and $272 million of bank facilities were to be repaid in 2019, with a further $112 million due in 2020, according to its 2015 results presentation.

SkyCity is to begin construction of the New Zealand International Convention Centre in Auckland in December this year after a deal with the government that secured an extension of its exclusive licence until 2048 and allowed the company to add 230 additional slot machines in the city.

The company plans to spend $50 million in the first phase of a major redevelopment of its Adelaide casino after earlier securing a 20-year extension to its exclusive casino licence in the South Australian capital.

The joint lead managers of the bond offer are Westpac Banking Corp, ANZ Bank New Zealand, Deutsche Craigs and First NZ Capital.

Earlier this month, SkyCity posted a record annual profit of $128.7 million, which it attributed to a rise in the number of international “high rollers” and a strong Auckland economy.

SkyCity shares fell 1 percent to $3.95 and have gained 2.8 percent this year.

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