Ryman Healthcare, New Zealand’s largest retirement village operator, has announced a $1 billion capital raise aimed at reducing debt and strengthening its financial position. This marks the company’s second major capital raise in two years, following a $902 million equity issuance in 2023.
Details of the Capital Raise
The capital raise consists of two components: a $313 million underwritten institutional placement and a $688 million underwritten pro-rata accelerated non-renounceable entitlement offer. The offer is priced at $3.05 per share, a 29% discount to the last closing price of $4.31.
Ryman has entered a trading halt on the New Zealand Stock Exchange (NZX) to facilitate the transaction. The offer is being managed by investment firms Jarden Securities Limited, Craigs Investment Partners, and Forsyth Barr, who are underwriting the issue.
Company chair Dean Hamilton stated that the equity raise would “reset the company’s balance sheet” by reducing debt gearing from 37.3% to 23.1%, below the previous medium-term target of 30-35%. This is expected to provide a more sustainable capital structure and improve financial resilience.
Financial Impact and Debt Reduction
The capital injection is expected to significantly improve Ryman’s financial stability by reducing net interest-bearing debt from $2.56 billion to $1.59 billion. The company has also secured amendments to its syndicated facility agreement, with an interest cover ratio (ICR) waiver extended until September 2026.
Ryman has committed to releasing over $500 million in cash over the next three to five years as part of its broader financial improvement strategy. Additionally, it aims to achieve $100-150 million in annualised cash improvements through cost-cutting measures and revenue enhancements.
Challenges and Market Conditions
The capital raise comes at a time of financial strain for Ryman. In November 2024, the company reported a 50% decline in net profit after tax for the half-year to September 30, dropping to $94.4 million from $187.1 million in the previous period. The company has also faced rising vacancy rates, with occupancy levels at 12.1% empty.
Market conditions have also played a role in Ryman’s struggles. The downturn in the residential housing market has impacted cash flow, as many retirees rely on selling their homes to move into retirement villages. Ryman’s investor call revealed that third-quarter sales were down 40% compared to the previous year.
Investment analysts have largely viewed the capital raise as a necessary move, despite concerns over frequent equity issuances and shareholder dilution. Jeremy Sullivan, an investment advisor at Hamilton Hindin Greene, described the decision as “prudent” given Ryman’s need for financial stability. However, he noted that the steep discount on the share offer was essential to attract investor participation.
Strategic Outlook and Growth Plans
Ryman’s leadership has emphasised that the capital raise will provide a foundation for future growth. Chief executive Naomi James, who took the helm in November 2024, said the company is undergoing a “business improvement programme” aimed at optimising cash generation and improving operational efficiency.
James highlighted that Ryman’s “continuum of care” model positions the company well to meet the growing demand for aged care services in both New Zealand and Australia. However, analysts have pointed out that the company has yet to outline specific new growth initiatives alongside its balance sheet restructuring.
Nikko AM research analyst Tim O’Loan expressed surprise that Ryman had not provided more details on future development plans, stating that companies across various sectors have been cautious in their outlook due to economic uncertainty.
Conclusion
Ryman Healthcare’s $1 billion capital raise is a decisive move to reduce debt and stabilise the company’s financial position. While this will likely strengthen its balance sheet and support long-term growth, concerns remain about the impact of repeated equity raises on shareholder value.