Studio City International Holdings Ltd, the controlling entity of the Studio City casino resort (pictured) in Cotai, Macau, officially announced the launch of an initial public offering (IPO) of American depositary shares, each ADS representing four class A ordinary shares of Studio City International Holdings.
The news was given by Studio City International Holdings’ 60-percent owner, Melco Resorts and Entertainment Ltd, in a Tuesday release. The remaining 40 percent stake in Studio City International Holdings is held by New Cotai Holdings LLC, an entity controlled by U.S.-based investment firms Silver Point Capital LP and Oaktree Capital Management LP.
Melco Resorts is already listed in the U.S., namely on Nasdaq, in New York. The firm is controlled by Melco International Development Ltd, the latter being listed on the Hong Kong Stock Exchange.
The Studio City International Holdings IPO is for a total 28.75 million ADSs. The price range for the offering “is currently estimated to be between US$10.50 and US$12.50 per ADS,” the Melco Resorts release stated.
Based on such price range, the offering is expected to generate gross proceeds of between US$301.88 million and US$359.38 million, stated Melco International in a separate filing on the operation.
Studio City International Holdings also granted the IPO underwriters a 30-day option to purchase up to an additional 4.3 million ADSs.
“MCE Cotai (a wholly-owned subsidiary of Melco Resorts and currently the holder of 60 percent of Studio City) and certain affiliates of New Cotai (which currently holds the remaining 40 percent of Studio City), have indicated an interest in purchasing up to an aggregate of 25.55 million ADSs (representing approximately 88.9 percent of the total amount of ADSs being offered in the global offering),” stated the filing from Melco International.
It added that, following the IPO, Melco Resorts was expected to remain as Studio City International Holdings’ majority shareholder. The document did not clarify whether Melco Resorts had plans to either reduce or increase its current 60-percent weight in the shareholding structure of Studio City International Holdings. But the IPO revised registration statement – filed on Tuesday – mentioned plans for Melco Resorts to control 57.3 percent of Studio City International Holdings’ voting interests post-IPO, with New Cotai retaining a 38.2-percent voting interest in the firm.
The document added that the operation could only start once the respective registration statement filed with the U.S. Securities and Exchange Commission became effective, which had not yet happened. No tentative schedule was mentioned.
“Studio City International Holdings expects to use the net proceeds of the offering to acquire newly-issued shares of its subsidiary, MSC Cotai Ltd. In turn, MSC Cotai expects to apply the net proceeds it receives for the repayment of certain existing indebtedness,” stated Melco Resorts’ release.
Deutsche Bank Securities Inc, Credit Suisse Securities (USA) LLC and Morgan Stanley & Co International plc are acting as joint bookrunners of this offering and as the representatives of the underwriters.
The Studio City controlling entity had first confirmed plans for a potential IPO in August 2017.
On a conference call with investment analysts in July, Melco Resorts’ management said it was currently in the process of developing the detailed design for Phase 2 expansion of Studio City, targeting to begin work in the second half this year.
Management stated it was confident that Studio City had ample cash on hand, cash flow and debt capacity available to fund most of the anticipated capital expenditure for Phase 2, but it did not disclose a budget for such expansion.
Studio City had a capital cost of US$3.2 billion and opened in 2015.
The Macau government granted earlier this year a three-year extension on the development deadline for the public land concession where Studio City sits. The new deadline is July 24, 2021.
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