Australian casino operator Crown Resorts Ltd on Wednesday said it had agreed an equity swap deal designed to act as a hedge on any future sell down in Asian casino developer Melco Crown Entertainment Ltd. The decision follows a recent upward movement in Melco Crown’s stock price.
“The swap transaction provides the company with a price hedge in respect of any future sale of Melco Crown shares equivalent to the number of MCE ADSs [American depositary shares] referenced in the swap transaction,” said Crown Resorts in its Wednesday announcement to the Australian Securities Exchange.
The filing added that the swap transaction provided for a hedge price of US$18.05 per ADS – equivalent to US$6.02 per Melco Crown share – on any future sale by Crown Resorts of its remaining Melco Crown holding. Crown Resorts currently holds 11.2 percent of Melco Crown.
Crown Resorts stated in its filing that the latest equity swap was for 12 million Melco Crown ADSs, equivalent to 36 million Melco Crown shares and to 2.4 percent of Melco Crown shares outstanding.
The Australian company had previously done a similar cash-settled equity swap deal in relation to 5.5 percent of its holding in Melco Crown, with an average price of US$5.33 per share.
According to Bloomberg data, Melco Crown’s Nasdaq-listed ADS stock has risen 11.9 percent in a fortnight, from US$16.50 on March 13, to US$18.46 at 8.10pm Eastern Daylight Time on March 28.
At the start of May 2016, Crown Resorts – alongside Hong Kong-listed Melco International Development Ltd, controlled by Lawrence Ho Yau Lung – each held a stake of 34.3 percent in Melco Crown. But in early May, Crown Resorts, controlled by James Packer, said it was cutting its holding in Melco Crown to 27.4 percent. Further sell downs in Melco Crown by Crown Resorts occurred in December, ultimately reducing its holding to 11.2 percent.
Nasdaq-listed Melco Crown confirmed to GGRAsia in an email on March 14 it would be changing its name to Melco Resorts and Entertainment.
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