Melco Resorts Finance Ltd, a wholly-owned subsidiary of casino operator Melco Resorts & Entertainment Ltd, announced on Monday a proposal to conduct an international offering of senior notes.
“The new notes are proposed to be senior obligations of Melco Resorts Finance, ranking equally with all of Melco Resorts Finance’s existing and future senior indebtedness,” said the group in a press release. The parent “will not be a guarantor of the new notes,” it added.
The company said the interest rate and other terms of the new notes would be “determined at the time of pricing of the new notes offering,” as per the announcement.
“Completion of the proposed new notes offering is subject to market conditions and investor interest,” it added.
Melco Resorts Finance on Monday also announced that it had started a conditional cash tender offer for any and all of its outstanding 5.250-percent senior notes due in 2026.
The tender offer is “conditional upon, among other things, the successful completion … of the new notes offering,” stated the group.
It added that the gross proceeds from the new note offering “shall be sufficient to fund the purchase of all outstanding existing notes in the conditional tender offer and the redemption of any existing notes which remain outstanding” following the completion of the tender offer, “before taking into account accrued interest, fees and expenses”.
According to CBRE Equity Research, the Melco group plans to issue US$500 million of new notes to redeem its US$500-million notes due in 2026.
“The new bonds will mature after the Macau gaming concession expiration, though this has already been successfully tested in the market,” wrote analysts Colin Mansfield and Connor Parks in a Monday memo.
They added: “We expect the transaction to be leverage neutral and slightly dilutive to free cash flow given the low coupon being refinanced.”
According to CBRE, the Melco brand “has a well staggered maturity schedule, with the nearest maturity not until 2027 pro-forma for this issuance”.
“Currently, US$1.56 billion is outstanding under Melco Resorts’ revolver after it was utilised to meet the US$1.0 billion 4.875-percent 2025 maturity,” stated the analysts.
“Therefore, any upsize to today’s offering we expect to be utilised to paydown the revolver balance to increase Melco Resorts’ liquidity,” they added.
The casino group has the bulk of its operations in Macau, and it also operates venues in the Philippines, the Republic of Cyprus, and Sri Lanka.
On September 1, Moody’s Ratings affirmed the rating of the Melco Resorts group – including Melco Resorts Finance – at ‘Ba3’, with a ‘stable’ outlook.
“The affirmation and stable outlooks of the Melco group companies reflect our expectation that their financial leverage will gradually improve over the next 12 to 18 months, underpinned by continued growth in Macau’s overall gaming revenues and their strengthening market position,” said at the time Stephanie Lau, a Moody’s Ratings vice president and senior credit officer.
