Casino operator Wynn Resorts Ltd says it expects 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. That is despite having “fully restored” its casino operations in Macau on March 20, stated the group in a Tuesday press release.
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 (pictured) in the city’s Cotai district.
Macau casinos were closed for a 15-day period in February as part of efforts from the local government to curtail the spread of the novel coronavirus. The city’s gaming venues were allowed to resume operations on February 20, although on a reduced basis due to government-imposed restrictions.
The Wynn group said in February that during the closure period, it incurred approximately US$2.5 million per day of cash operating expenses, excluding cash interest expense of approximately US$500,000 per day.
“On March 20, 2020 our casinos’ operations were fully restored; however, certain health safeguards, such as limiting the number of seats per table game, slot machine spacing, temperature checks, mask protection, and health declarations remain in effect at the present time,” said Wynn Resorts in its Tuesday statement. “We are currently unable to determine when these measures will be lifted,” stated the company, adding that it expected costs to be higher than revenue “until such measures are lifted”.
The group also noted that visitor numbers to Macau had meaningfully decreased since the outbreak of Covid-19, driven by the “strong deterrent effect on travel and social activities,” and travel restrictions by respectively the Macau government, mainland China and other jurisdictions.
Data from Macau’s Public Security Police, the body responsible for monitoring border traffic, indicated that on some days last week fewer than 300 visitors entered the city.
Credit facility, 1Q preview
As of March 31, the group’s properties in Macau had approximately US$800 million of cash and cash equivalents and US$74 million of available borrowing capacity under their revolving credit facility. The parent company said that an additional US$50 million was drawn in April under the revolving credit facility; meaning US$24 million remains available for additional liquidity.
Wynn Macau Ltd had an additional US$1.0 billion of cash and cash equivalents as of March 31, 2020, according to the latest release.
Deutsche Bank Securities Inc suggested in a note earlier this month that ender conditions on debt held either by Wynn Resorts Ltd or its Macau-operations arm should not be a concern during the current coronavirus pandemic and the huge disruption to the industry.
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.
During the closure of its U.S. properties, Wynn Resorts has committed to pay salary, tips and benefits to all of its “domestic” employees, inclusive of part-time employees, through May 15. “We estimate that the cost for such full salary and benefits continuation along with other cash operating expenses of these properties is approximately US$3.5 million per day, excluding approximately US$0.8 million per day of cash interest expense,” stated the company on Tuesday.
In its latest statement, Wynn Resorts said it expected the group’s combined total operating revenues to be in the range of US$912 million to US$969 million for the three months ended March 31, compared to US$1.64 billion in the first quarter of 2019.
Adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) – excluding certain leased retail space directly owned by Wynn Resorts – is expected to be between US$58 million to US$65 million in the first three months of 2020, compared to US$484.0 million in the prior-year period.
The information was included in a release announcing that some of the group’s subsidiaries are to offer 7.75-percent senior unsecured notes due 2025. The aggregate principal amount notes to be issued has been increased to US$600 million from an originally announced US$350 million. The net proceeds from the offering will be used for general corporate purposes and to pay related fees and expenses, said the parent company.
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Visitor arrivals to Macau in April