Penn National Gaming’s combination stock sale and debt offering grew by more than $100 million Tuesday, with the regional casino operator saying it expects to see proceeds of $600 million from the transactions.
The company said it priced more than 16.6 million shares of the company’s stock at $18 per share, which could bring in $300 million. Another $300 million will be raised through a 2.75% convertible debt that comes due in 2026.
Penn National, which has 41 properties in 19 states, could see proceeds of $690 million if the stock and debt underwriters fully exercise their options to purchase additional shares and notes.
Penn said it would use the funds for “general corporate purposes.” Shares of Penn closed at $17.75 on the Nasdaq Tuesday, down 91 cents or 4.88%.
Penn is the latest gaming company to raise new debt from the credit markets in recent weeks, following similar moves by Wynn Resorts, MGM Resorts International, and Everi Holdings.
The markets have been open to new debt offerings even as the nationwide casino industry has been shut down since mid-March in an effort to slow the spread of the COVID-19 coronavirus pandemic. However, commercial and tribal casinos in several jurisdictions have begun to reopen with limited operations this month, with additional limited reopenings planned going into June.
During last week’s quarterly earnings conference call, Penn National said it had enough liquidity on its balance sheet – $730.7 million in cash at end of March – to survive without any revenues until the end of the year. CEO Jay Snowden said it expected to reopen some of its regional casinos by the end of this month.
Penn had a total debt load of more than $2.89 billion as of March 31.
SunTrust Robinson gaming analyst Barry Jonas said in a research note Tuesday that the stock sale and debt offering may have surprised investors following management’s commentary regarding adequate liquidity “with a line of sight” to upcoming casino re-openings.
“However, it appears investors clearly remained focused on solvency risk regardless, with shares reacting favorably to the decision to fully shore up the balance sheet,” Jonas said.
Penn National has touted the benefit it expects to receive from sports betting and other digital gaming opportunities through its $163 million joint venture with sports media platform Barstool Sports as it comes out of the pandemic casino closures.
Jonas said he thought investors will focus their attention on fundamentals in Penn’s regional casino network, where drive-in exposure could lead to a quicker recovery.
“We also think enthusiasm for the longer-term sports betting opportunity could help drive upside amidst a likely slow ramp back to normalized casino demand levels,” Jonas said.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
