UPDATE 1-NZ's Sky City raising NZ$214 mln in shares

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WELLINGTON, April 21 (Reuters) - New Zealand casino company Sky City Entertainment Ltd (SKC.NZ) plans to raise around NZ$214 million ($118 million) through a share issue to beef up its balance sheet, the company said on Tuesday.

It said it would place 71 million shares to institutional investors at NZ$2.52 each, raising at least NZ$178.9 million.

The underwritten offer price is a discount of 11.6 percent to the stock's last traded price of NZ$2.85, before it was placed on a trading halt.

"This equity raising will materially reduce gearing and net debt, and significantly improve credit metrics," said Chief Executive Nigel Morrison in a statement.

Sky said it would also offer up to NZ$35 million worth of new shares to existing shareholders, giving small shareholders the chance to avoid being diluted by the new issue.

The company said earnings were holding up in the face of challenging economic conditions.

It said revenues in the the months to March 31 were 4.3 percent ahead of last year and operating earnings were only 1.1 percent down for the financial year to date on a year ago.

The company said it was on track to post a full year profit comfortably in the NZ$99 million-NZ$106 million range of analysts' forecasts.

Last year the company reported a net full year profit of NZ$49.9 million, which reflected a NZ$60 million writedown in the group's cinema business.

The company owns or has an interest in five casinos in New Zealand and two in Australia.

A ban on new casinos in New Zealand has given the company a virtual monopoly, while in Australia it faces rivals such as Tabcorp Ltd (TAH.AX) and Crown Ltd (CWN.AX).

In February, Morrison told Reuters the company was weathering the New Zealand recession and would look to acquisitions for growth. Australian media reports last month linked Sky City with Tabcorp's Queensland assets. ($1=NZ$1.81) (Reporting by Gyles Beckford; Editing by Mark Bendeich)