Sky TV launches rights issue at 12c/share to raise $157m, throwing a hospital pass to NZ Rugby of having to stump up $7.4m in cash to stop dilution of its 5 percent stake, which was worth 89c/share last October

‘Buy now for less than half price’: Sky Television has announced plans to raise $157 million through an underwritten and deeply discounted share offer to strengthen its balance sheet. The offer is priced at 12 cents a share – a 63 percent discount to its last closing price of 33 cents, making it the most heavily discounted capital raise to date.

Black hole? Or bargain? A $9 million placement to institutions and a $148 million pro-rata entitlement offer at 2.83 new shares for each share already held will have investors wondering if this is a Covid-19 bargain or pouring more money into a black hole. Sky Television shares are down 73 percent from this time last year.

Cutting costs: Chief executive Martin Stewart signalled cost reductions of between $80 million and $95 million in the coming financial year with potentially more to come, depending on the level of live sport it broadcasts next year. Sky now expects revenue of $730 million to $750 million and EBITDA of $155 million to $175 million in the current financial year ended June 30. Revenue could fall to $610 million to $640 million and earnings to $100 million to $130 million next financial year. Sky shares were halted yesterday ahead of the capital raise.

Hospital pass: New Zealand Rugby Chair Brent Impey wouldn’t be drawn on whether the rugby union, a 5 percent shareholder in Sky Television, would take up its pro-rata entitlement at a cost of around $7 million, or risk diluting its existing shareholding, which was worth 89c when Sky TV included the stake in a new rights deal.

Offside call? NZ Rugby’s constituent unions are struggling with their own financial woes and may not love precious cash being invested in Sky TV, which will push for lower television rights payments to those unions and players.

Lower payout: Fonterra reported a lift in earnings for the third quarter and expects its gross margin to improve $244 million on last year to $2.5 billion. Total group normalised earnings before interest and tax for the nine months to the end of April came in at $815 million, an increase of $301 million year-on-year. The co-op has forecast a farmgate milk price of $5.40 per kilogram of milksolids to $6.90/kg MS which is considered to be an unusually wide range.

Unprecedented: Fonterra CEO Miles Hurrell said the co-op had reduced its operating expenses by $148 million, while net debt fell by 23 percent. Hurrell said the market remained uncertain on the back of the global Covid-19 crisis and was like nothing Fonterra had ever experienced previously.

Less swiping: With the majority of shops and businesses closed and borders sealed in April, new Reserve Bank data show that total monthly credit card billings in New Zealand slumped 41.3 percent to $2.1 billion in seasonally adjusted terms in April from March. This was the largest monthly fall on record to levels last seen in 2006. Credit card spending in April last year was $4.1 billion.

Payback: China is retaliating against Australia after it pushed for an international Inquiry into the origins of Covid-19. Beijing issued a new warning by opening the door to new checks on its iron ore. The escalating trade row comes after China banned Australian beef imports and slapped a tax on barley in the wake of Canberra’s calls for the Inquiry.

We’ll show you’: The new Chinese customs rules risk Australia’s $63b iron ore exports being singled out for extra checks, analysts say. Instead of mandatory inspections, China will now carry out optional checks at the request of the importer – meaning Australia’s competitors could be given priority.

Global trade slumps: The World Trade Organisation has reported imports and exports fell to their lowest level for at least four years as a result of the coronavirus pandemic. Warning there was little evidence of the downturn ending soon, the WTO said it believed import and export activity would fall “precipitously” in the first half of 2020.

Andrew Patterson is Newsroom's Markets Editor and has worked for decades as a financial journalist, radio presenter and editor with Australia's ABC, Radio Live and NBR.

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