Ladbrokes rights issue raises us$ 457 million to cut debt

Chelsea and Manchester United, two of Britain's most heavily-backed clubs, won six of seven games up to end-September. By then, there were only four Premier League draws, bad news for bookies as most punters gamble on a win.

Ladbrokes shareholders will be entitled to purchase one new share for each two they already own at 95 pence per share, a discount of nearly 50 % to Wednesday's closing price. The move followed that by rival William Hill, which raised us$ 556.7 million through a share placing in February while also scrapping its dividend and renegotiating banking facilities to reduce debt.

Ladbrokes said net debt would fall to us$ 1 billion from us$ 1.5 billion following the underwritten rights issue. It had said in August it intended to reduce its debt but would "naturally de-lever over time" given conditions in financial markets.

"Given previous comments from management the rights issue has come as a bit of a surprise," said KBC Peel Hunt analyst Nick Batram. "Clearly trading has forced management's hand and this gives us some concern."

Ladbrokes shares, which have underperformed the FTSE All Share Travel & Leisure Index FTASX5750 by 22 % since the start of the year, were down 7.2 %. William Hill shares were down 4.8 %.

Ladbrokes said operating profit fell by 58 % to us$ 35.6 million in the quarter to September 30, with net revenue down 15 %. The results were impacted by the weak economic environment and the run of punter-friendly football and horseracing results.
The bookmaking industry has traditionally been seen as resilient in times of adversity when compared with other consumer industries, but trading has been hit in recent months.

William Hill said in August its full-year profit would be below expectations after a drop in weekend customer numbers and a run of punter-friendly results. Irish bookmaker Paddy Power reported a 26 % drop in first half operating profit.

Ladbrokes CEO Chris Bell told reporters the recession had had a worse impact than he had expected. Looking ahead to 2010, he said: "Unemployment, in my view, is going to have to peak before things start to get better".

A list of British companies have gone cap in hand to investors for cash to shore up balance sheets as a lack of bank lending has left few options for raising funds. Ladbrokes said it planned to resume dividend payments at the time of its first-half results next year.