United States-based casino operator Wynn Resorts Ltd announced on Wednesday it was arranging up to US$2.6 billion in fresh funding and at the same time restructuring the business so that an entity called Wynn Resorts Finance LLC will hold the group’s interest in the Wynn Las Vegas and Encore Boston Harbor properties in the United States.
Wynn Resorts Finance will also hold the group’s approximately 72 percent controlling interest in Wynn Macau Ltd, the operating entity in its Macau operation.
The Wynn group has committed itself to spending US$2 billion on an expansion of its Wynn Palace casino resort on Cotai in Macau, and is also a suitor for a casino licence in Japan, and has pledged a large spend on resort infrastructure if it were to win a Japanese licence.
According to Wednesday’s filing, Wynn Resorts Finance and its subsidiary Wynn Resorts Capital Corp will offer US$750-million in aggregate principal amount senior notes, due 2029 in a private offering.
Concurrently with the issuance of the notes, Wynn Resorts Finance expects to enter into a new first-lien term loan A facility in an aggregate principal amount of up to US$1 billion and a new revolving first-lien credit facility in an aggregate principal amount of up to US$850 million, and undergo the internal restructuring.
Under the rejig, Wynn Resorts Finance will control Wynn Las Vegas LLC – which owns and operates the Wynn Las Vegas integrated resort in Las Vegas, Nevada, excluding certain leased retail space that is owned by Wynn Resorts directly – and Wynn Group Asia, which holds Wynn Resorts’ approximately 72-percent controlling interest in Wynn Macau, and in Wynn MA LLC, which owns and operates the Encore Boston Harbor integrated resort in Everett, Massachusetts.
The parent also announced on Wednesday some guidance on anticipated business performance in the third quarter in its three places of operation.
The group said regarding Macau: “We anticipate our Macau operations’ casino revenues and adjusted property EBITDA [earnings before interest, taxation, depreciation and amortisation] for the third quarter of 2019 will be negatively impacted by significantly lower VIP gaming turnover resulting from a variety of factors in the region, including the ongoing trade dispute between the U.S. and China and disruptions in Hong Kong SAR.” The latter was a reference to months of protests in Hong Kong that in several instances have caused serious disruption to public transport and air travel in that city.
The parent said that for the group as a whole it expected operating revenues to be in the range of approximately US$1.01 billion to US$1.12 billion for the two months ended August 31, 2019, compared to US$1.15 billion for the two months ended August 31, 2018.
Adjusted property EBITDA for the two months to August 31 – excluding some retail space at Wynn Las Vegas – was expected to be in the range of US$225 million to US$248 million, compared to US$339.4 million for the two months ended August 31, 2018, said Wynn Resorts.
Analysts Carlo Santarelli and Steven Pizzella of Deutsche Bank Securities Inc noted in a Wednesday memo following the announcements: “Wynn noted that [table games] hold [percentage] hampered results by US$30 million to US$35 million in the quarter-to-date period, the majority of which we believe to be in Las Vegas.”
“While the results are clearly below consensus, we believe the softer quarter-to-date trends in Macau in July and August had investors poised for a third quarter 2019 miss. As such, we think the pre-announcement likely de-risks the story to an extent over the coming weeks,” they added.
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Proportion of mass-market GGR in the aggregate casino revenue for 2019 in the Macau market