Studio City International Holdings Ltd, the controlling entity for the Studio City casino resort (pictured) in Macau, is starting a series of private offers for its Class A ordinary shares, it announced on Tuesday.
The firm’s largest shareholder, Macau gaming licensee Melco Resorts and Entertainment Ltd, has already announced it will purchase all shares offered to it under the operation. Melco Resorts will also seek to acquire “the maximum number of unsubscribed securities available for purchase by it.” That could potentially lead Melco Resorts to increase its stake in the firm. It currently controls about 54.3 percent of Studio City International Holdings.
Casino developer and operator Melco Resorts runs the gaming operations at the Studio City property. Melco Resorts is controlled by gaming entrepreneur Lawrence Ho Yau Lung.
One of the minority shareholders of Studio City International Holdings is New Cotai LLC. The latter entity is backed by investment funds Silver Point Capital LP and Oaktree Capital Group LP. It controls a stake of about 36.3 percent in Studio City International Holdings, according to information disclosed on Tuesday.
The private offers are being made at a price of US$3.89 per Class A share, to existing shareholders which hold, “in aggregate, approximately 99 percent of the issued share capital of the firm,” said Studio City International Holdings in a press release.
The firm added that, concurrently, its wholly-owned subsidiary MSC Cotai Ltd, was offering New Cotai “a right to acquire an additional participation interest in MSC Cotai at a price equivalent to the per Class A share price of the Class A private placements.” The filing did not provide much detail on the impact of the deal.
Upon the successful completion of the private placements, Studio City expects to“receive gross proceeds of no less than US$450 million and up to approximately US$500 million,” it stated.
Studio City International Holdings separately announced, also on Tuesday, that a wholly-owned subsidiary of the group was proposing “to conduct an international offering of senior notes in one or more tranches”. The interest rate and other terms of the notes would be determined “at the time of pricing of the notes offering,” it said.
Completion of the proposed offering “is subject to market conditions and investor interest,” Studio City International Holdings stated. The net proceeds would be used to redeem in full the group’s outstanding 2016-issued, 7.250-percent senior secured notes due in 2021, and to “partially fund the capital expenditures of the remaining project for Studio City,” the firm said.
The Studio City property generated negative adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) of US$9.4 million in the first quarter of 2020, compared with positive EBITDA of US$96.4 million in the prior-year period. “The year-over-year decrease in adjusted EBITDA [at the property] was primarily a result of softer performance in all gaming segments,” according to results disclosed in May by Melco Resorts.
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"I believe that when Macau makes a decision, there is going to be a requirement to invest more"
Chairman and chief executive of Las Vegas Sands