Melco's Cash Boost: A Deep Dive into the Rights Issue
Melco International Plans to Gather Over 100 Million Dollars via Rights Offering
Hong Kong-listed Melco International, a notable casino tycoon, is planning to rake in up to HKD781.1 million (approximately $100.7 million) with a rights issue of new shares. In a filing, the company's parent company announced this move, offering up to 759,350,377 shares, allowing current shareholders the opportunity to buy one new share for every two existing ones at a subscription price of HKD1.0286 each.
By the books, Melco International aims to use the funds from this rights issue to repay part of its outstanding credit facility, due for settlement this year, along with related interest costs. The company pointed out that this strategy is crucial for paying down existing debt, strengthening its balance sheet, and enhancing the overall capital structure for sustainable growth.
Swinging into action, Melco International carefully evaluated various fundraising strategies before settling on the rights issue approach. The firm argues that this fundraising method offers a fair chance for all shareholders to retain their stakes while participating in the company's future prospects. Furthermore, it allows qualifying shareholders opting out to sell their entitlements in the open market if they prefer to cash out instead.
As of the previous year's end, Melco International's total assets were around HKD84.75 billion, with outstanding interest-bearing borrowings standing at approximately HKD60.69 billion. The company's gearing ratio, which indicates financial leverage, has escalated to 71.6 percent, a sharp rise from 42.4 percent as of June 30, 2019. The board's resolution to pursue equity fundraising underlines their focus on managing this higher debt level and positioning the business for long-term stability.
sources:
- [1] - Stock exchange filing
- [2] - Bloomberg, Melco International to raise up to HK$7.8 billion through shares issue
- [3] - Financial Review, Melco International extracts $41.6m from leisure subsidiary loan
- [4] - Interactive Investor, Melco International Development Ltd
- [5] - Reuters, Melco International to raise up to HK$7.8 billion to pay off debt
- The funds raised from Melco International's rights issue of up to HKD781.1 million will be primarily used to repay part of its outstanding credit facility.
- By offering current shareholders the opportunity to buy new shares, the rights issue is designed to allow them to retain their stakes while participating in the company's future prospects.
- The strategic move to pursue equity fundraising aims to strengthen Melco's balance sheet, enhance its capital structure, and provide stability for sustainable growth.
