Originally Posted by
mistaTea
Just digging out some of the commentary from Sky regarding their debt...
As part of this growth plan, the Directors are also currently reviewing the funding structure of the Group given the investments required under the transformation programme and maturity of the $100 million bond in March 2021. The current bank facility expires in July 2022 with a stepdown in the bank facility from $200 million to $150 million by July 2021 (refer Note 7).
There has been talk of a discounted rights issue, but that would be the least favourable option in my view. Sky would need to raise at least $100M to clear the bonds for it to make any kind of sense. So, say a 1:1 discounted issue @25c/share raises ~ $109M.
Assuming they did not want to be diluted by half, NZRU would need to pony up ~$5.5M.
RugbyPass Investors LLC would need to pony up ~$6.3M.
I doubt very much either of those two major investors are in a position to come up with that kind of dough. And I do not think they would be very happy either with their holdings being diluted so savagely. Time will tell if I am wrong, but I will admit now that it would shock me and come as an unpleasant surprise.
Given the cheap money available, I still think a better approach is to review the funding structure to borrow more money on more favourable terms. Clearly Sky need more money to fund their ambitions, it's just a matter of how and with who.
Current debt accounts for ~27% of Revenue. When you look at NETFLIX, their borrowings account for more like 75% of Revenue. Now, I am not suggesting we should borrow like crazy in the way that NETFLIX has...but I think Sky can comfortably increase borrowing capacity whilst still being financially prudent. If that can't be achieved by issuing new bonds and/or negotiating better terms with The Australian banks, then look further abroad. In this climate I don't think it would be too difficult at all to find large financial institutions willing to loan money. And we wouldn't be paying a 6.25% yield either like we are with the bonds issued in 2014.