Penn National Gaming Hits Markets in $500 Million Capital Raise, Selling Stock, Convertible Notes
Posted on: May 11, 2020, 08:37h.
Last updated on: May 11, 2020, 08:54h.
Shares of Penn National Gaming (NASDAQ:PENN) slid early Monday after the regional gaming company said it’s raising $500 million via sales of convertible notes and common stock.
![Penn National Stock Sales](https://www.casino.org/news/wp-content/uploads/2020/05/nyse-1.jpg)
The company said it’s selling $250 million worth of common stock, a move that dilutes current investors by bringing new shares to market, explaining why Penn stock is lower by 2.33 percent at this writing. The operator of Ameristar and Hollywood casinos, among others, is also selling $250 million in convertible notes coming due in 2026. Convertible bonds are called that because the holders of those notes can later convert into common stock.
The Company expects to use the net proceeds from the Common Stock Offering and the Convertible Notes Offering for general corporate purposes,” according to a statement issued by Penn. “Neither of the closings of the Common Stock Offering or the Convertible Notes Offering is conditioned upon the closing of the other offering.”
Under the terms of the offerings, underwriters Goldman Sachs & Co. LLC and BofA Securities have 30 days to purchase up to another $37.5 million worth of equity and $37.5 million of convertibles.
Raising Cash
When Penn National delivered first-quarter results last week, the company said it has $730.7 million in cash on its balance sheet as of the end of March.
However, the operator is still burning through $83 million per month, as its gaming venues across the US remain shuttered by the coronavirus pandemic, indicating the capital raises announced today are perhaps essential should the company face an extended zero-revenue environment.
Penn operates 41 gaming properties in 19 states, all of which have been closed since mid-March. That also means the company could contend with as many as 19 different reopening dates and plans.
As just a few examples, restart dates for Mississippi casinos are still up in the air, while Indiana gaming properties are likely to remain closed until mid-June. Illinois Gov. J.B. Pritzker is saying that state won’t open until certain standards are met. Penn is among the largest operators in each of those states.
Positive Sign
Although the COVID-19 outbreak punished gaming stocks earlier this year, Penn’s securities sales announced today are the latest confirmations that the industry can easily access capital markets, even in a trying climate.
Last month, both MGM Resorts International (NYSE:MGM) and Wynn Resorts (NASDAQ:WYNN) dramatically increased the size of corporate bond offerings to accommodate strong demand.
Based on where Penn stock currently trades and the $250 million price tag on the equity sale, the company would be bringing approximately 13.88 million new shares to market. Entering Monday, the operator had 115.42 million shares outstanding.
Penn is up almost five-fold from its 52-week low hit in March. The company has a market capitalization of $2.13 billion.
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