Shares in casino and bingo halls operator Rank (RNK) jumped 6% to 91.75p on Friday after the company raised £70 million of fresh cash to help it through the coronavirus pandemic and avoid breaching banking covenants.
Rank placed 77.7 million new shares (19.9% of the existing shares in issue) with institutions and private investors at 90p per share, an impressive 4% premium to the 86.3p level before the announcement.
LOOKING OUT FOR THE LITTLE GUYS
It was refreshing to see that retail investors were also given an opportunity to participate in the fund raising and not excluded as happens so often, with the company saying it ‘valued its retail investor base.’
The retail offer, run exclusively though the primaryBid.com platform, gave ordinary investors the chance to subscribe for packets of stock with a minimum subscription value of £100.
According to the company, retail investors subscribed for one million new shares, worth £900,000.
The successful completion of the fund raise triggers an extension of the £50 million minimum liquidity test until March 2022.
The fact that Rank was able to raise money at short notice and at a premium indicated support from key shareholders, including its biggest stakeowner, Malaysian banking group Hong Leong, which took up its 56% allocation of new shares.
BOLSTERING THE BALANCE SHEET
The curfew and second lockdown is expected to impact the company’s liquidity position in coming months and it is not expecting to achieve positive monthly cash flows while the lockdown remains in place.
Prior to the late night curfew on 24 September the company was operating around cash flow break-even. Since then, average weekly revenues to 24 October fell to £5.4 million from the £7.1 million it was generating in the four weeks to 20 September.
Before today’s announcement Rank had cash and available resources of £90 million following the expiration of an undrawn £30 million revolving credit facility. The £70 million raise and liquidity test waiver along with the £25 million proceeds from the post quarter-end sale of the company’s sole Belgium casino takes available resources to £185 million.
Broker Shore Capital believes this is sufficient to ensure the company survives an extended lockdown commenting, ‘although we appreciate that the near-term outlook remains challenging, with the liquidity issue addressed, Rank is well positioned to exploit the long-term opportunity.’
Rank has been hugely impacted by the Covid-19 outbreak and subsequent shutdowns. The stock has plunged by almost three-quarters from pre-pandemic 320p levels.