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Macau casino operator SJM Holdings tumbles more than 16% in Hong Kong to hit HK$2.6, the lowest level since March 2010.
The sell-off comes after the Hong Kong-listed casino firm also said it launched that day a rights issue, aiming to raise net proceeds of up to nearly HK$2.94 billion. The rights issue will offer one rights share for every four existing shares at a subscription price of HK$2.08 per rights share, representing 34% discount on SJM’s closing price of HK$3.14 on Wednesday.
The company received an unsecured term loan of HK$2 billion ($254.8 million) from its controlling shareholder, Sociedade de Turismo e Diversões de Macau SA, also known as STDM. SJM Holdings said in a filing to the Hong Kong bourse that the loan from STDM “is for a fixed period of six years from the date of drawdown”, with “interest of 4 percent per annum.”
The proceeds will enable SJM subsidiary SJM Resorts, S.A. – the company that holds its Macau casino concession – to satisfy a key requirement under Macau’s new gaming law by which all concessionaires must have MOP$5 billion in share capital set aside to pre-qualify for the government’s re-tender process.
The move has, however, been met with less enthusiasm by analysts, with JP Morgan’s DS Kim stating it is “disappointing if not surprising that the cap raise is comprised of debt and equity which is contrary to what was discussed on the earnings call two days ago where management told investors STDM would support the company with ~HK$5 billion loan and indirectly dismissed the possibility of an equity raise.”
