GGRAsia – Wynn Macau Ltd US$600mln bond offer, says Jan-Feb strong

Wynn Macau Ltd US$600mln bond offer, says Jan-Feb strong

Mar 03, 2023 Newsdesk Latest News, Macau, Top of the deck

Macau-based casino operator Wynn Macau Ltd announced on Friday a US$600-million offering of 4.50-percent convertible bonds due in 2029, open to “professional investors only”. The news was given in a filing to the Hong Kong Stock Exchange.

The company expects that the net proceeds from the offering – after deduction of commission and other related expenses – will be approximately US$586 million. It intends to use them for “general corporate purposes”.

Wynn Macau Ltd stated in its latest filing that the bonds were convertible into company shares at an initial conversion price of HKD10.24 (US$1.30) per share. That, it added, represented a premium of 26.8 percent over Thursday’s closing price of HKD8.08 per share as quoted on the Hong Kong Stock Exchange.

The bonds are convertible into a total of 459,774,985 shares, representing 8.8 percent of the total existing issued share capital of Wynn Macau Ltd.

Brokerage CBRE Securities LLC said in a note commenting on the bond offering announcement, that it was “another savvy financial manoeuvre” by the Wynn group, to “shore up the balance sheet” in Macau.

The net proceeds “could potentially be used to repay [its] US$600 million of 4.875 percent notes due 2024”, helping Wynn Macau Ltd to “reduce annual interest expense and kick out the maturity five years”, wrote analysts John DeCree and Max Marsh.

CreditSights Inc, a division of the Fitch group, stated however it “would not be surprised to see [Wynn Macau Ltd's] management refrain from using funds to repay outstanding debt.”

“Rather, we think funds could be used to assist with recovery efforts in Macau — which has recently ramped up — and/or to help support capital expenditure related to [Wynn Macau Ltd's] recently committed investment projects,” wrote analysts James Goldstein and David Bussey.

The Wynn group plans between US$50 million and US$220 million in capital expenditure in Macau during the current year, management announced last month. The investment is part of the minimum MOP17.7-billion (US$2.21-billion) spending that the group has pledged to pour into Macau over the next 10 years, as a condition of getting a fresh gaming concession.

Wynn Macau Ltd operates the Wynn Macau casino hotel on the peninsula, and Wynn Palace (pictured) in the Cotai district. The firm is a subsidiary of U.S.-based casino operator Wynn Resorts Ltd.

Total current and long-term debt outstanding at end-2022 and related to the Macau operations was US$6.19 billion, according to the group’s fourth-quarter results announcement.

‘Strong’ biz post CNY

In a Thursday announcement also related to the bond offer, Wynn Macau Ltd provided preliminary information on the firm’s performance for the first two months of 2023. It said that during the Chinese New Year period, its Macau operations delivered approximately US$4 million of hold-normalised adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA).

The firm had already supplied some data on its business performance during the Chinese New Year holiday period. It did so during its conference call with investment analysts following its fourth-quarter results announcement.

“Additionally, we have been encouraged that business volumes have remained strong following Chinese New Year, despite the typical seasonal slowdown in the market post the holiday period,” Wynn Macau Ltd said in its filing.

It added: “During the approximately four-week period post the holiday, our mass market table drop recovered to 82 percent of the corresponding 2019 period, and direct VIP turnover was 20 percent above 2019 levels. Similarly, the non-gaming business also remained strong with tenant retail sales 78 percent above the corresponding 2019 period.”

Based on its preliminary financial information for the first two months of 2023, the firm said it expected to have generated operating revenues in the range of US$391 million to US$395 million, compared to US$225.1 million for the two-month period ended February 28, 2022. Adjusted property EBITDA was expected to have been in the range of US$94 million to US$98 million, compared to US$4.5 million for the first two months of last year.

Wynn Macau Ltd added that, based on data from the Macau’s gaming regulator, the firm estimated its gross gaming revenue market share during the first two months of 2023 “was approximately 15.0 percent, which was above 2019 levels, despite the meaningful changes in the junket VIP environment”, the latter a business segment in which the group was traditionally very strong prior to the Covid-19 pandemic.

Commenting on Wynn Macau Ltd’s performance for the first two months of 2023, brokerage JP Morgan Securities (Asia Pacific) Ltd said the results were “very encouraging”.

Analysts DS Kim and Mufan Shi said the data disclosed by the company implied daily EBITDA of US$1.8 million to US$1.9 million, “just at 50 percent of pre-Covid-19 levels,” which had been “US$3.7 million per day in 2019.” The latest EBITDA data represented a “very large 40 percent to 50 percent above” the EBITDA estimate the brokerage had modelled for Wynn Macau Ltd for the first quarter of 2023, at US$1.2 million to 1.3 million per day, they added.