Tabcorp will not pay a dividend this year as part of an agreement with its banks to ease pressure on its finances by waiving its debt covenants until the end of 2020.
The wagering group has been hit hard by the COVID-19 pandemic with race, dog, and harness racing tracks shut to the public and the suspension of major sporting leagues, all of which has seen a slump in revenues, cash flow, and profits.
That has led to the company approaching its banks for a deal on the debt and Tuesday’s announcement revealed that lenders representing $2.2 billion of its loan facilities had agreed to waive leverage and interest cover covenants on testing dates due at June 30 and December 31.
As part of securing the lenders’ agreement to the waiver, the Tabcorp said its Board had resolved not to pay a final dividend for the June 30 financial year.
Tabcorp paid a final dividend for 2018-19 of 11 cents a share and an 11 cents a share interim for the 2019-20 year in March.
Tabcorp’s shares have fallen 31% February 14, from $4.65 to $3.17. The stock has however recovered from COVID-19 lows of $2.18 in late March.
News of the dividend cut and the deal with banks saw the shares rise 2.5% to $3.25 as investors grew more confident the company would not face financial pressures later this year.
“Tabcorp is also in advanced discussions with its US Private Placement holders (which represent fully hedged debt equivalent to $2.1 billion) to obtain changes to existing covenants to provide additional flexibility to accommodate the impacts of COVID-19,” directors told the ASX on Tuesday
The company said it had $820 million in available liquidity. It has a $171 million loan due in December and a working capital facility of $225 million due in July 2021, and no other debt maturities until April 2022.
“The waivers complement recent actions we have taken to preserve our liquidity and mitigate the financial and earnings impacts of COVID-19,” Tabcorp CEO David Attenborough said in the statement.