Why is the SkyCity (ASX:SKC) share price falling today?

The SkyCity (ASX: SKC) share price closed slightly lower today after the company revised the details around its bond offer.

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The SKYCITY Entertainment Group Limited (ASX: SKC) share price lost ground today after the company revised the details around a $115 million bond offer made last month.

SkyCity shares were trading down 0.31% at $3.26 at the market close after the company revised upwards the margin range on its six-year bond offers.

The casino and hotel operator is still recovering from a huge share price fall early last year, so let’s find out how today’s report is affecting the SkyCity share price today.

SkyCity’s bond offers

In April, SkyCity announced it was offering up to NZ$125 million (AU$116 million) in 6-year, unsecured, unsubordinated, fixed-rate bonds. The bonds will mature on 21 May 2027.

Then on 10 May 2021, SkyCity announced an indicative issue margin range of 1.6% per annum and a 3% minimum interest rate for the bonds. Today, the company has revised the indicative issue margin range to 1.7% per annum, but it’s kept the 3% minimum interest rate.

The company said it upped the rate in response to “market changes”. It’s offering the bonds to institutional investors and New Zealand retail investors. SkyCity has also left open the option to increase bond sales by a further $50 million to $175 million total if the offer is oversubscribed.

The issue margin and interest rate for the bonds will be set following a bookbuild process, which started today but won’t close until 17 May. 

The company noted the purpose of the capital raising initiative in its indicative terms sheet, published today:

The offer forms part of SkyCity Group’s ongoing capital management strategy, enhancing diversity of sources of funding and lengthening the debt maturity profile. The net proceeds of the offer will be used to reduce the drawings on SkyCity’s bank facilities.

SkyCity share price snapshot

As recently as two months ago, the SkyCity share price had been one of the stronger performing ASX gaming shares. However, its 12-month gain through 2020 to March this year has more than halved since then and it’s now 5% down against the consumer cyclical sector in the past year.

This is despite slow and solid gains since March. The SkyCity share price has gained steadily since the company announced the bond offer at the end of last month.

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Motley Fool contributor Lucas Radbourne-Pugh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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