Wynn Macau, MGM China look for financial support, Moody’s weighs in


April and May weren’t kind for Wynn Macau. The Asian arm of Wynn Resorts saw a total of just under $37 million in revenue at the two casino properties it controls in Macau, a stark contrast to the more than $759 million it saw a year earlier. The company announced last week that it would be looking to generate some quick cash somehow, somewhere, and now has its plan laid out. Wynn Macau wants a loan for $750 million that is reportedly going to involve Deutsche Bank AG through its Singapore branch.

The casino operator submitted a filing (in pdf) to the Hong Kong Stock Exchange yesterday, explaining that Deutsche Bank will be the “initial purchasers” of company notes to support the loan. They will mature in 2026 and carry an interest rate of 5.5%, and are expected to be listed on the Hong Kong Stock Exchange, which has reportedly already given its thumbs up to the deal. Once all the fees and commissions are factored in, Wynn Resorts should pick up about $743 million to help it bounce back from the Macau lockdown caused by the coronavirus.

Wynn Macau adds, “The company intends to use the net proceeds from the proposed offering for general corporate purposes until business recovers from the effects of the Covid-19 pandemic, and then to facilitate the repayment of a portion of the amounts outstanding under the Wynn Macau credit facilities.” According to the terms of the agreement to offer the notes, Wynn cannot “effect a consolidation or merger” or “sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the company and its subsidiaries” that might impact the value of the notes.

The offering has received a lukewarm response by some analysts. Moody’s Investors Service weighed in after reviewing the fundraising initiative’s guidelines, giving it a rating a “B1.” The firm explained, “The additional liquidity is beneficial as it further improves the company’s liquidity profile and runway in Macau to over two years on a cash-burn basis as they [Wynn Macau Ltd’s leadership] manage the current weak operating environment, including reduced visitation levels in Macau” and added, “Although there is an initial increase in leverage on a gross basis, the transaction enables the company to reduce the secured debt in its capital structure once business conditions improve.”

Wynn Macau isn’t the only Asia-focused casino operator to be on the hunt for an economic pick-me-up. MGM China Holdings is considering extending an offer of $500 million in senior notes in order to give it more liquidity. Bank of America Securities will coordinate the effort, as well as participate in the purchase of the notes. Moody’s gave the offering a rating of “Ba3,” explaining, “The additional liquidity is beneficial to improve flexibility to manage in the current weak operating environment including reduced visitation levels, but the incremental debt is a credit negative increase in leverage to help further cover the company’s current cash burn.”