Debt burden makes Hill dividend a non-runner

Robert Lea11 April 2012

William Hill is counting the cost of borrowing too much in the good times as it admitted its banks will be charging it as much as 10% interest to keep the bookie in business.

Shareholders are also counting the cost. Asked to finance an additional £350 million fund-raising through a rights issue, they will get no dividend this spring and a much-reduced payout in the future.

Hill has £1.2 billion of borrowing arrangements that expire in a year, a legacy of the £500 million takeover of rival Stanley Leisure in 2005 and £450 million of share buybacks.

It has agreed with its banks to cut its total funding needs, and has put in place new borrowing arrangements for £838 million, topped up by the
£350 million from shareholders.

The reduced borrowing commitments should keep Hill's annual interest bill at about £90 million but the small print of the deal reveals the firm is effectively paying interest of 8.5% on its borrowing this year, rising to 10% next year.

Shareholders are being asked to fork out £350 million, paying 105p for new shares, a steep 57% discount to last night's close of 2461/2p. Hills said it is scrapping this year's final dividend, worth 15.5p last year.Underlying operating profits for 2008 fell 3% to £278 million.

Analysts are hoping for improved figures this year as the company has got its act together on its internet offering after years of false starts.

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