Rights issue for Ladbrokes?

Gambling group declines to comment on reports that a rights issue is imminent

The UK online and offline gambling group Ladbrokes plc has so far declined to comment on rumours sweeping across the London market Wednesday that it is about to initiate a rights issue to raise GBP 300 million in order to pay down a reported GBP 960 million debt burden.

The Financial Times was first with the reports, claiming that the gambling group would tap shareholders for cash with the launch a rights issue this week. The respected business newspaper expected the issue to be priced at a 35-40 percent discount to Wednesday’s closing price on the company's shares of 181p.

Proceeds from the issue will be used to help Britain's biggest bookmaker pay down its GBP 960 million debt burden and reduce its ratio of net debt to earnings, the FT said.

"The company is not in danger of breaching covenants. William Hill has raised the benchmark on the ratio after their rights issue and this is just to match them," a person close to the situation told the FT.

A Ladbrokes spokesman declined to comment.

The newspaper noted that the move comes just seven months after rival William Hill plc launched a GBP 350 million rights issue and follows a spate of fundraising in the public sector that has included reports of negotiations on a debt for equity deal by Gala Coral .

Bloomberg's news service reported that the fundraising activities are due to bookmakers being hit by heavy losses on football since the start of a Premier League season that has witnessed a drying up of draws – the bookies’ favourite result.

They are also being hammered by a run of wins by the Premier League’s leading and most heavily backed clubs.

"Already in August, Ladbrokes was forced to cut its interim dividend by nearly a third and tighten its cost-cutting programme following a drop in revenues and underlying profits," Bloombergs reports, noting that for the half year to June '09, revenues at Ladbrokes fell 7 percent to GBP 565 million as increasingly cautious gamblers cut back on their wagers. Underlying profit dipped 4 percent to GBP 131 million.

Along with details of the rights issue, Ladbrokes is expected to give an update on current trading, in which it is expected to highlight difficult conditions.

Like rival William Hill, Ladbrokes has plans to shift online operations to Gibraltar to become more competitive.

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