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Gateway to Raise $120 Million to Fund Acquisitions

Gateway to Raise $120 Million to Fund Acquisitions
Gateway aims to bring in an estimated 600 new residents into its communities
Mar 09, 2016 By Kaivalya Kandarpa Tags: GTY

Gateway Lifestyle Group (ASX:GTY) announced that it has secured acquisitions of six Manufactured Home Estates (MHEs) for a combined consideration of $49.3 million. The company is also set to undertake an equity raising of $120 million through institutional and retail entitlement offers.

Capital Raising to Fund Acquisitions and Repay Debt

The company is undertaking a fully underwritten $120 million equity raising, which consists of a $40.2 million institutional placement and $79.8 million 2 for 15 entitlement offer. The shares have been priced at $2.4, a 7.3% discount to GTY’s closing price yesterday.

The retail entitlement offer is expected to take place on 16 March 2016, while the institutional entitlement offer is set to commence today. The new stapled securities will rank equally with the existing securities.

The company aims to use the proceeds to fund the acquisitions and repay its debt, in order strengthen its balance sheet.

These acquisitions are a combination of established, converted and expanded MHEs and are expected to settle within 2 months. The company now owns a total of 1800 MHE sites comprising of 428 sites, occupied by existing manufactured homes and 752 potential sites for new manufactured homes.

Gateway has also reported that the company is currently engaged in advanced due diligence and negotiations with regards to an acquisition of two additional MHEs, for a total consideration of $32.5 million.

Gateway’s CEO Mr. Trent Ottawa commented on the acquisitions and equity raisings: “These acquisitions demonstrate our continued ability to source MHEs to grow our portfolio of MHE communities. The acquisitions increase our pipeline of potential sites available for new manufactured homes to 4,175. We are excited about the opportunity to bring in an estimated 600 new residents into our communities.”

Business Update and Outlook

Pro forma net debt LVR (Loan to Value Ratio) has been reduced from 28.9% to 19.6%, below the company’s target range of 25% to 35%. Moreover, the undrawn debt capacity has been increased from $110 million to $141 million.

The company remains on track to deliver 261 home settlements in FY16, underpinned by increase in demand for new home sales, which is expected to continue in the upcoming half year.

GTY will remain in a trading halt today as the company proceeds with its institutional entitlement offer.

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Kaivalya Kandarpa Author: Kaivalya Kandarpa Mar 09, 2016

Kaivalya is an equity analyst and a client advisor at Wise-owl. She specialises in fundamental and technical analysis for large and mid-cap companies. Having completed her bachelor's degree in Business Administration majoring in Finance, Kaivalya has a comprehensive understanding of international stock market movements. She tracks local and overseas markets and compiles analytical reports for various industries.

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