Macau casino operator Sands China Ltd said in a Monday filing that it would have access to a subordinated unsecured loan of US$1 billion from its parent, United States-based Las Vegas Sands Corp (LVS).
The deal came into effect on Monday (July 11) and the loan is repayable on July 11, 2028, the firm stated after stock trading hours in Hong Kong,
Sands China said the agreement “highlights both Las Vegas Sands’ and the company’s confidence in the long-term growth potential of Macau, and the availability of the loan further bolsters the company’s balance sheet position and liquidity.”
Las Vegas Sands – which earlier this year closed the US$6.25-billion disposal of its Las Vegas, Nevada properties in the United States – owns approximately 70 percent of the issued share capital of Sands China.
There has been frequent investment analyst commentary recently on liquidity for Macau’s six casino operators due to a stop-start business environment amid periodic Covid-19 alerts in either mainland China, or Macau.
JP Morgan Securities (Asia Pacific) Ltd said in a Monday note commenting on the loan that it would “extend Sands China’s liquidity runway by six months to a total of 15 months (by September 2023), even under the zero-revenue assumption (i.e., pure cash-burn with no gross gaming revenue).”
According to analysts DS Kim and Livy Lyu, this “should be more than enough liquidity to weather through this downturn [in the Macau market], as we cautiously expect a meaningful easing of travel policy to gradually kick in from end-2022/early-2023.”
A week-long shutdown of Macau’s gaming floors began on Monday, to help stop community transmission of Covid-19.
It emerged over the weekend that there had been fresh outbreaks of Covid-19 reported in mainland China. There were in Shanghai and Macau’s neighbouring province of Guangdong, including in the provincial capital Guangzhou and Dongguan.
Sands China noted in its Monday filing to the Hong Kong Stock Exchange that the parent’s loan would “support, among other things, the working capital and general corporate purposes of the group”.
The loan can be paid off early by Sands China “in whole or in part at any time without penalty”.
In the first two years of the loan facility, Sands China will have the option to elect to pay cash interest at 5 percent per year or payment-in-kind interest at 6 percent per annum, “by adding the amount of such interest to the then-outstanding principal amount of the loan”. After that, “only cash interest at 5 percent per annum will be payable,” Sands China said.
JP Morgan stated in its Monday note on the deal that the terms of the loan seemed “quite favourable” for Sands China.
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