Playa Hotels & Resorts Prices $125M Share Offering; Shares Drop 7%

Playa Hotels & Resorts on Jan. 6 announced the pricing for the offering of a sale of 35 million at a price of $5 per share. Shares plunged 7.3% in Wednesday’s extended market trading after closing 5.5% higher at $5.60 on the day.

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Playa Hotels & Resorts (PLYA) said that the public offering consisted of 25 million shares in its common stock and 10 million additional shares sold by a shareholder. The company expects to raise $125 million in gross proceeds from the sale. The share offering is expected to close on Jan. 11 subject to closing conditions.

Playa will use the sale proceeds to repay the amount outstanding under its revolving credit facility and for general corporate purposes. Deutsche Bank Securities, BofA Securities, Citigroup and Nomura are the joint book-running managers for the offering.

Citigroup analyst Smedes Rose on Dec. 15 upgraded the stock’s rating to Hold from Sell and lifted the price target to $5.25 (6.3% downside potential) from $3.

According to Rose a near-term liquidity event is now behind the company despite its high debt levels. A near-term focus would remain towards multi-year recovery in demand trends, the analyst summed up. (See PLYA stock analysis on TipRanks)

From the rest of the Street, the stock scores a cautiously optimistic analyst consensus of a Moderate Buy based on 1 Buy and 2 Holds. The average analyst price target of $5.42 implies downside potential of 3.2% to current levels.