British betting giant Ladbrokes is hoping to raise £275 million through a rights issue and use the funds to help its balance sheet and reduce an estimated £962 million mountain of debt.
Ladbrokes has some 2,700 betting shops and also operates online bookmaker Ladbrokes.com but stated that it would not be paying a final dividend for 2009 as it looks to improve its financial position.
The Harrow-based firm revealed that the weak economic environment alongside a run of unfavourable football results have hurt its bottom line. It stated that two of Britain's most heavily backed clubs, Chelsea and Manchester United, won six of their seven games up to the end of September. In addition, the Premiership overall had seen only four draws, which is bad news as most punters gamble on a win.
The rights issue will see Ladbrokes shareholders entitled to purchase one new share for each two that they already own at 95 pence each, which is a discount of nearly 50 percent on last week’s closing price.
Ladbrokes revealed that its operating profit for the third quarter dropped 58 percent to £22.4 million while net revenues decreased 15 percent. However, Brian Wallace, Finance Director for Ladbrokes, stated that the decision to launch a rights issue was not taken a result of the firm’s third quarter performance. He revealed that the company had been assessing options for a capital structure since 2008.
“We needed to take the level of debt down and looked at doing that organically but the balance of where trading is and the desire to get the debt down meant we decided to get on with it,” Wallace told The Wall Street Journal.
If successful, the rights issue would see 300,658,239 new ordinary shares offered, which represents about 50 percent of the company's existing share issue, while Ladbrokes’ net debt would fall to £687 million.
Ladbrokes’ move follows that by rival William Hill, which raised £350 million through a similar share placing in February while also scrapping its dividend and renegotiating banking facilities to reduce debt.
