Tabcorp has little ratings headroom if it plans bid for National Leisure and Gaming CITY BEAT: Michael Bennet From: The Australian November 13, 2009 2:26PM
ANALYSTS say Tabcorp has little wiggle room on its credit rating if it has any desires to bid for smaller rival National Leisure and Gaming.
NLG said in a brief statement yesterday that it has been approached “from time to time” as it addresses its options for its long term future, but that none have been sufficiently developed to warrant disclosure.
NLG also pointed out that the offers were below its current share price.
Shares of NLG jumped 26 per cent to 3.8 cents in intraday trade today, offsetting yesterday’s 21 per cent fall to 3 cents -- the price it started the week at.
At 3c, NLG has a market cap of just $15m compared to net debt of $170m.
The research team at NAB questioned reports that Tabcorp could be one of the mysterious suitors because of its current BBB-plus credit rating.
“Tabcorp doesn’t have much headroom in its rating and if it did decide to undertake a debt-funded takeover S&P’s view on Tabcorp’s rating would likely be equally driven by Tabcorp’s current operating performance in the current half,” NAB analysts said in a report.
“A rebound from the previous second half and the full-year performance would likely see the BBB plus rating reinstated; a flat or worsening performance would put it BBB plus under pressure.”
The report, however, did admit the acquisition would make some strategic sense and only increase Tabcorp’s gearing to 37 per cent from 35 per cent.
NLG Price at posting:
4.0¢ Sentiment: Hold Disclosure: Held
