A recently-announced unsecured bond offering by U.S.-based casino operator Wynn Resorts Ltd is good news for the gaming industry, as it shows capital is still available to the sector despite the ongoing Covid-19 crisis. So says brokerage Union Gaming Securities LLC.
“This is a significant milestone for the industry as it represents the availability of capital even in this environment, at least for some issuers,” Union Gaming analysts John DeCree and Sam Ghafir wrote in a Wednesday memo.
They added: “There will likely be a number of gaming issuers that will need to test the markets in the coming weeks, and we suspect there will be demand at various levels of risk. While not everyone will be as successful as Wynn Resorts, we think it is important to remember that there is real money demand for quality businesses with good assets and proven management teams.”
Wynn Resorts announced on Tuesday the pricing and upsizing of a new private bond offering. The firm said the aggregate principal amount of notes to be issued had been increased to US$600 million from the previously announced US$350 million. The 7.75-percent notes, issued by two indirect wholly owned subsidiaries of Wynn Resorts, are due on 2025.
The Wynn group said it planned to use the net proceeds from the offering for general corporate purposes and to pay related fees and expenses.
Wynn Resorts is the parent company of Macau-based Wynn Macau Ltd. The latter company runs the Wynn Macau resort in downtown Macau, and Wynn Palace in the city’s Cotai district.
“Wynn Resorts led the way for the gaming sector… with an upsized bond offering, marking the first new issuance for the sector since Covid-19 hit,” the Union Gaming analysts wrote.
They added: “It doesn’t surprise us that Wynn Resorts was the first deal out of the gate as a well-known seasoned issuer with a long history of timely and successful capital-markets activity.”
Union Gaming said the capital raise by Wynn Resorts was “a very smart and opportunistic insurance policy as the company didn’t really need the additional liquidity at this point.”
Messrs DeCree and Ghafir said that what was “particularly encouraging” about the Wynn Resorts offering was “the underlying demand, with several market participants reporting the book was multiple times oversubscribed which was later evidenced by the US$250 million upsizing.”
The effects of the Covid-19 pandemic have led to market-wide temporary closures of casinos in key gaming jurisdictions in the Asia-Pacific region, including Singapore, the Philippines, South Korea and Malaysia. Macau ordered the suspension of operations at all casino facilities for 15 days in February, but casinos have since been ordered to reopen.
Wynn Resorts said on Tuesday it expected to continue to have “cash costs in excess” of the amounts it is earning at the group’s properties in Macau, due to the negative impact from the Covid-19 pandemic and the associated restrictions regionally and globally to travel and tourism.
Wynn Resorts also has operations in Las Vegas, Nevada, and in Boston, Massachusetts. Its casinos in those U.S. markets are currently closed amid efforts to contain the further spread of the Covid-19 infection: in Las Vegas casinos will remain closed at least until the end of April, and Wynn Resorts’ property in Boston is shut until May 4.
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"One thing that is certain under the coronavirus era is that the biggest beneficiaries are the illegal operators, both bricks and mortar and online"
Partner and director overseeing government affairs at casino industry consultancy Global Market Advisors