Pennsylvania-based Penn National Gaming Inc announced today it started an underwritten public offering of common stocks, as well as an underwritten offering of convertible senior notes, to the amount of $250 million each. The new debt security the company is issuing has maturity in 2026 and can be converted into Penn’s common stock anytime until its due date.
Penn National informed in its announcement it is giving a 30-day option to underwriters to buy up to $37.5 million of additional shares of its common stock, and a 30-day option for the purchase of up to the same amount of additional convertible notes, with the proceedings from both the common stock and the debt offering to be used for general corporate purposes. Neither of the closings of the two public offerings is dependent on the closing of the other, the announcement continued.
Penn National that has 41 gaming properties spread across 19 states, all of them still closed down due to the infection containment measures, recently issued its first quarter financial results, posting huge drop in revenue and net loss in excess of $600 million for the quarter.
During times when all casino operators are utilizing ways to trim costs and boost liquidity, Penn National is not the first one to issue debt. And surprisingly, investors are responding well to new public debt offerings by casino operators, despite the fact that the industry has been hit hard by the gaming facilities closure and the sense of uncertainty hovering above the sector.
In April, Wynn Resorts issued $600 million of senior notes due in 2025, an upsizing of the initially planned amount of $350 million. MGM Resorts also issued new debt due in 2025, to the amount of $750 million, also upsized from the initially planned $500 million.
Penn National has already undertaken a series of cost-reduction measures, including company-wide furloughs and salary cuts, and credit amendments with principal lenders, including selling its Tropicana Las Vegas Strip property to the real estate fund Gaming & Leisure Properties Inc.
The Pennsylvania- based gaming company hired the services of Goldman Sachs and Bank of America Securities, to act as joint book-running managers for the common stock and the senior convertible notes offerings. A shelf registration statement relating to these securities was filed with the U.S. Securities and Exchange Commission (SEC) and became effective.