Tabcorp raises $371m from institutional share sale

Australian lotteries and gaming giant Tabcorp has completed the sale of new shares to institutional investors through which it raised AU$371m, and now aims to raise a further $229m from retail investors.

Announced last week, the operator aims to raise $600m in total through the accelerated entitlement offer, with the proceeds to be used to pay down existing debts, with the ultimate goal of reducing its gross debt to EBITDA ratio and improve its credit rating.

The first tranche of fundraising saw institutional investors purchase 114m new shares, priced at $3.25 apiece. Approximately 97% of eligible shareholders took up the entitlement opportunity, with the remaining shares sold through a shortfall bookbuild, priced at $3.70 per share.

Retail investors will now have the opportunity to subscribe for one new share for every 11 existing ordinary shares in the business, also priced at $3.25 each. This will run from 28 August to 10 September.

Tabcorp chief executive David Attenborough said last week that the business would look to reduce the gross debt to EBITDA ratio from 3.0 to 3.5x, to 2.5 to 3.0x. Its dividend payout ratio will be cut to between 70% and 80% of the operator’s net profit after tax.

“This is expected to strengthen Tabcorp's balance sheet, provide greater financial flexibility in uncertain times, and provide additional credit metric headroom for covenant and rating purposes,” Attenborough said at the time.

Tabcorp expects total proceeds from the retail offering to reach $229m. The combined proceeds of the institutional and retail offers would reduce Tabcorp’s debt to EBITDA ratio from 3.8x to 3.2x, and leave the business with $1.50bn in undrawn bank facilities, the operator noted.

Last week the business reported a 4.8% year-on-year decline in revenue for its financial year ended 30 June, 2020, after a marginal rise in lottery revenue failed offset declines from its wagering and media, and gaming services divisions. The business swung to a loss for the year following a $1.09bn write-down in the value of these two divisions, resulting in an $870m net loss.