William Hill bets on £350m cash call

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February 22, 2009

BOOKMAKER William Hill is to join the rush of businesses making cash calls with a plan to raise about £350m in a rights issue to refinance its debt.

The company, led by chief executive Ralph Topping, is expected to announce the fundraising on Friday with its annual results. The rights issue is likely to be fully underwritten by Citigroup, William Hill’s financial adviser and broker.

It is part of a wider plan to restructure the group’s £1.2 billion of borrowings. The lending arrangement expires in March 2010, but the company’s banks, which include Barclays, HSBC and RBS, are expected to agree a new facility. It is not yet clear what terms have been agreed.

The fundraising will see the bookmaker scrap its dividend, which would save it about £70m, and investors seem ready to give the rights issue plan the thumbs-up.

A big shareholder said: “William Hill is a good business. A rights issue at that sort of level should be quite well received. We would be supportive of it.”

Several companies have tapped the market for fresh funding in recent weeks, many of them big property businesses, such as British Land and Hammerson. They could be joined this week by Liberty International, which may announce a £500m fundraising.

The deals done to date have been well received by investors, who seem happy to provide funding to help good businesses through the economic slump, particularly when they have strong asset-backing.

William Hill, which said it “would not comment on speculation”, is thought to be trading reasonably well. In a statement on January 15, it said gross win – the amount of money staked minus what it pays back to winning punters – was up 8% for the previous 11 weeks against a year earlier.

Investors will also be reassured by a bullish set of financial results from William Hill’s rival Ladbrokes last week.

A big concern for both companies is unemployment. Citi leisure analyst Richard Taylor wrote in a research note last week that with unemployment forecast to peak at 10.1% in 2010 – similar to its high in the early 1990s when William Hill’s shops saw a 7% drop in turnover – “we do not believe it is unreasonable to assume a similar potential hit to revenues in 2009 or 2010”.

There is also some uncertainty about the use of gaming machines in betting shops, as the government has said it may review their deployment.