Refinancing of HKD19-billion (US$2.4-billion) in syndicated loans for Macau casino operator SJM Holdings Ltd is “already approved by government but pending banks’ approval,” according to a Thursday memo from Morgan Stanley Asia Ltd.
The need for the assent of the Macau government for such an arrangement had previously been flagged by a number of investment analysts, citing guidance from the casino firm’s management.
Morgan Stanley gave the information on governmental approval as an update from its recent Morgan Stanley 2022 Virtual China Summit.
SJM Holdings’ refinancing would “provide HKD6 billion of additional liquidity; as it retires HKD13-billion of old loans,” said the note from Morgan Stanley analysts Praveen Choudhary and Gareth Leung.
The institution said the new maturity date on the facilities would be 2028, and the effective interest rate would be the Hong Kong Interbank Offered Rate (HIBOR) plus 1.5 percent to 2.25 percent, “similar to the existing” terms on the present facility.
Earlier this month, SJM Holdings had indicated to investment analysts it had the option to ask for an up to HKD5-billion loan from parent Sociedade de Turismo e Diversões de Macau SA, also known as STDM, if faced with liquidity problems.
Morgan Stanley said in its Thursday update, that daily operating expenses for SJM Holdings were running at HKD16 million.
“If we include 2022 interest expense of HKD700 million and maintenance capital expenditure of HKD500 million, the total daily cash burn reaches HKD22 million,” wrote the analysts.
They added – referring to the casino group’s new HKD39-billion Cotai resort, which opened in July last year – that “another HKD800-million to HKD900-million capital expenditure on Grand Lisboa Palace [pictured] is still due”.
SJM Holdings’ current cash balance – put at HKD1.75-billon at the end of the first quarter – could “support this” level of outgoings “for three months at zero revenue,” further noted Morgan Stanley, reiterating previous commentary by the investment community.
The institution further stated that SJM Holdings expected break even in terms of overall earnings before interest, taxation, depreciation and amortisation (EBITDA) when market casino gross gaming revenue reached 40 percent of 2019 – i.e., pre-pandemic – level.
EBITDA break even for Grand Lisboa Palace might “require Hong Kong-Macau-mainland reopening,” said Morgan Stanley, referring to an easing of travel restrictions between the three sides.
In a Thursday note, banking group JP Morgan had expressed some concern about the timing of SJM Holdings issuing HKD1.9-billion in convertible bonds, to acquire the premises of Oceanus, a venue with a casino that it runs but does not presently own, located near Macau’s Outer Harbour.
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