Australia's Echo to raise cash to boost VIP business
Updated 05:11 PM Jun 15, 2012
MELBOURNE - Australian gaming firm Echo Entertainment plans to raise about A$454 million (S$580 million) through a new share issue to pay down debt and help bolster its high-roller business as it vies with billionaire James Packer to win Asian players.
Echo said on Friday the 1-for-5 entitlement offer would reduce gearing and help ensure a more appropriate capital structure for the gaming group, whose high-roller business has been underperforming.
"The (international VIP) business provides a large growth opportunity for Echo both through improved market share and underlying volume growth," Echo said.
Analysts estimated earlier this week that Echo needed about A$250 million to bring its gearing ratios to more conservative levels after spending heavily on refurbishing its Sydney Star casino.
Any amount raised over that level would give extra firepower to support the VIP business.
Echo also said that its major shareholder Crown, owned by Mr Packer, would take up its full entitlement in the share issue.
Casino group Crown has taken a 10 per cent stake in Echo in an effort to win greater control over its rival and wants to use its licence to build a second casino in Sydney to lure more Asian high-rollers.
Mr Packer is considering an alliance with fellow Echo shareholder casino operator Genting Singapore to further his ambitions in Australia, a source told Reuters earlier this week.
Australian media reported that Mr Packer and Genting Singapore had met in Macau for discussions.
Genting Singapore said last week it has taken an unspecified stake in Echo. Under Australian listing rules, any stake of more than 5 per cent must be declared.
Echo's capital raising, first flagged on Tuesday, has been slightly delayed by talks with Echo's US bond holders to modify the terms of its debt facilities to allow the raising.
The raising offer price will be A$3.30, a deep discount to the share's last close at A$4.49. The shares are due to resume trade on Monday.
Echo also said it now expects normalised earnings before tax and one-offs to be in the range of A$380 million to A$390 million for the year to June 30, a touch below median analyst forecasts of A$393 million according to Thomson Reuters data.
"Trading conditions have remained difficult (in the second half) with revenues negatively affected by soft consumer sentiment," Echo Managing Director Larry Mullin said in a slide presentation. REUTERS
Publish date: 16/06/12