The past two months have been challenging for Wynn Macao, the Asian affiliate of Wynn Resorts Limited. The company earned $ 37 million less in revenue at the two casino properties it operates in Macau, nothing to do with last year’s fiscal year when more than $ 759 million was invested.
Last week, the company announced that it was arranging a $ 750 million quick loan with Deutsche Bank AG through its Singapore branch.
Wynn Macau made a presentation to the Hong Kong Stock Exchange in which it noted that Deutsche Bank will be the first to acquire the company’s notes in support of the loan. They will be issued at an interest rate of 5.5% maturing in 2026. The notes are expected to be listed on the Hong Kong Stock Exchange, which would have already approved the deal.
Wynn Resorts should collect about $ 743 million, after deducting the transaction fees and commissions. The cash will help the company cover operating expenses and recover from the crash caused by the coronavirus pandemic.
“The company intends to use the net proceeds of the proposed offering for general corporate purposes until the business recovers from the effects of the Covid-19 pandemic, and then to facilitate the repayment of a portion of the outstanding amounts under Wynn Macao Credit Facilities,” stated Wynn Macau.
As long as the notes are held by your creditors, Wynn may not “effect a consolidation or merger” or “sell, assign, transfer, transmit, or otherwise dispose of all or substantially all of the property or assets of the company and its subsidiaries”.
However, analyst response to this offer was not as expected. After reviewing the company’s fundraising guidelines, Moody’s Investor Service awarded it a “B1” rating.
“The additional liquidity is beneficial as it further enhances the company’s liquidity profile and track in Macau by more than two years on a cash-burning basis as they [the leadership of Wynn Macau Ltd] manage the weak environment current operation, including reduced visits levels in Macao,” Moody’s explained.
“Although there is an initial increase in leverage in gross terms, the transaction allows the company to reduce guaranteed debt in its capital structure once business conditions improve,” the firm added.
Like Wynn Macau, other Asian casino operators are seeking economic stimulus to deal with the crisis. Reports indicate that MGM China Holdings is also considering launching a $ 500 million offering in senior notes in order to increase its liquidity. The coordinator of these efforts will be Bank of America Securities, which will participate in the purchase of the bonds.
Moody’s was rated “Ba3” on this offering. The firm explained that:
“The additional liquidity is beneficial in improving flexibility to manage in the current weak operating environment, including low levels of visits, but incremental debt is a negative credit increase in leverage to help further hedge the current cash burn of the company”.