Retirement village operator Ryman Healthcare seeking $1 billion in new capital to reduce debt
Monday, 24 February 2025
Retirement village provider Ryman Healthcare plans to raise $1 billion of new capital to reduce its $2.6b debt to a more “prudent” level.
But the capital raise will dilute its existing shareholders as the new shares it plans to issue will be at a discount of 29.2% to Ryman’s closing price of $4.31 on the NZX on Friday.
The company has gone into a two-day trading halt on the NZX sharemarket while it completes the first portion of the capital raising, which it will use to reduce its debts to around $1.6b.
Chief executive Naomi James, who was recruited last year to head the turnaround of Ryman, said the company’s debt was “uncomfortably high” in the current market conditions, and the company needed a more robust balance sheet so it could trade through whatever conditions the market threw at it.
“We needed to reset the balance sheet,” she said.
Despite raising $1b, Ryman’s plan involved looking at beginning dividends to shareholders next year, and releasing around $500 million of cash from the business over the next two to three years.
It could see the company selling some of its landbank of properties.
Ryman grew to become one of the biggest developers in the country, and James said its high debt level went back to it previous “build, build, build” strategy.
Ryman’s unsustainably high debts levels had contributed to the company posting only a slim profit in its last financial year, and its share price has fallen from just short of $7 in mid-2023 to just over $4.30, and currently has dividends to shareholders suspended.
In November, Ryman after-tax profit for the first half of the year dropped 50% on last year, and the company said it wouldn’t be starting any new retirement village developments before next year due to challenging market conditions.
James acknowledged disappointment over the diluting effect of the capital raise on existing shareholders, and said the company had worked for the capital raise to be as fair as possible for them.
“We understand the dilution impact,” she said.
However, she said existing shareholders who participated would participate in the value the company planned to create.
The capital raise will begin with Ryman seeking $313m through investment services providers Jarden Securities, Craigs Investment Partners, and Forsyth Barr.
After two days, when that is completed, the trading halt will lift for the remaining $688m part of the capital raise to start.
The capital raising will be underwritten by Jarden, Craigs and Forsyth Barr.
In a release to the NZX on Monday, Ryman said it considered that a trading halt was desirable to enable Jarden, Craigs, Forsyth Barr and Ryman to conduct the placement and the institutional entitlement, and determine the allocation of shares.
Ryman said the trading halt was needed because the capital raising process would “impact a fair, orderly or transparent market as information about the placement, the institutional offer component … or take up by investors may be known by some market participants and not others, so the market would not be trading on a fully informed basis”.
“Ryman believes that such information will be price sensitive,” the company’s general counsel Morgan Powell said.
The trading halt would end on Wednesday when the market opened.
Last year, there was a rash of equity raises including Infratil, which raised $1.15b to buy data centres; Auckland Airport, which sought and found $1.4b to support the airport’s capital investment programme, and Fletcher Building, which raised a total of $700m to help pay down debt.