The Estia Health Ltd (ASX: EHE) share price has taken a battering today. While the broader market is trading mostly flat, shares of the aged care operator have slipped 8.6% to just $2.45. They did hit a low of $2.35 earlier in the session.
This morning, Estia Health's shares emerged from a trading halt that was instigated by the company on Monday pending a major equity raising. The aged care operator is raising $136.8 million by way of an underwritten, non-renounceable entitlement offer which entitles eligible shareholders to 1 new share for every 3 existing shares at a price of $2.10 per share.
That price tag represents a discount of more than 21% to the group's closing price of $2.68 on Friday last week. Meanwhile, $131 million of the proceeds will be put towards reducing the group's core debt, while the remaining $5.8 million will help offset the transaction costs. Estia had more than $253 million of debt on its balance sheet as at 30 June, 2016.
Notably, shareholders will also forgo their interim dividend to allow the company to preserve more capital. It does, however, intend to reinstate its dividend policy after this half-year period, where it expects to pay "at least 70% of net profit after tax" out for those ongoing periods.
In what will perhaps come as a relief for shareholders, Estia did at least re-confirm its earnings guidance for the full-year. It expects earnings before interest, tax, depreciation and amortisation (EBITDA) to fall in the range of $86 million to $90 million.
That said, Estia based that guidance range on an assumed occupancy level of 93.7% for the full year. It noted that it is currently hovering around an occupancy rate of 92.8%, which suggests it will need to improve its performance for the remainder of the year to achieve that target.
Estia's rivals Japara Healthcare Ltd (ASX: JHC) and Regis Healthcare Limited (ASX: REG) have also fallen 0.9% and 0.5% on the news, with all three shares having underperformed the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) over the past 12 months. Estia itself has shed more than 65% of its market value over that time.
Indeed, Estia Health and its rivals have come under intense pressure this year as a result of government funding cuts. Given these potential headwinds, investors may want to avoid the sector, for now.
