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The 13 delays casino launch to 2019 as funding options run dry

Monday, 26 February 2018 19:37
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Troubled Macau hotel operator The 13 Holdings has revealed that it doesn’t expect to launch casino and retail operations at long-awaited The 13 Hotel until at least 31 March 2019, but doesn’t yet know where the necessary funding will come from.

The news formed part of a weekend filing in which The 13 Holdings announced the impending issuance of rights issue shares, starting this Wednesday 28 February and running for eight days, which aims to raise HK$973 million needed to finally complete the 13 Hotel, located in Cotai.

Successful completion of the issuance of shares is the company’s last  to open the property once dubbed “the most luxurious hotel in the world,” but of greater concern is how The 13 Holdings will fund gaming operations with the revelation that it will cost an extra HK$352 million on top of current revenue raising efforts to launch its proposed casino.

“Such costs have not been included into the current funding exercise,” the company said in a filing to the Hong Kong Stock Exchange.

“As at the latest practicable date, the company has not yet formulated further fund-raising plans to accommodate such costs, but the board expects that once The 13 Hotel is operational and has received approval of the Macau Government for the gaming operation, the group will be in a better position to explore further funding options including but not limited to bank borrowing, if necessary.

“The management of the company currently expects the casino and retail shops to be opened 31 March 2019 subject to, among other things, the entering into a formal agreement with the licensed operator and the approval of the Macau Government.”

The 13 Holdings entered into a Memorandum of Understanding (MOU) with an affiliate of Macau sub-concession Melco Resorts in 2008 in relation to the management and operation of a casino proposed to be opened in The 13 Hotel. Despite 10 years now passing since that MOU was undertaken, the company said it had received confirmation letters from the affiliate in both 2010 and 2012, and that “there has been no new law, legislation, policy, rule or regulation enacted by the Macau Government since 2013 that negatively impacts the licensed operator in obtaining approval from the Macau Government for implementing the gaming operation envisaged under the MOU.”

Successful acquisition of a casino license not only requires the Macao Government Tourism Office (MGTO) first granting necessary licenses for hotel operations before the current 30 April 2018 deadline, but the affiliate to agree to apply for the license on The 13 Holdings’ behalf as per the previous MOU. Nevertheless, the company maintains grand plans for its gaming operations.

“Regarding the proposed casino, the management of the company currently anticipates that it will comprise of 66 gaming tables, consisting of approximately 50 high stakes mass market tables and approximately 16 VIP room tables, as well as approximately 50 slot machines with minimum bets that are set at a comparatively high level,” it said.

The 13 Holdings Ltd was granted a HK$300 million bridging loan in December 2016 but shut down work on its Cotai hotel in July 2017 due to a shortage of funds. The drawdown of the bridging loan in October saw work resume on 21 November 2017, however the company also revealed at the time its need to raise more money via rights issue shares.

The right issue shares are being offered at a price of HK$1.10 and on a basis of 10 for every one common share held, with The 13 Holdings adding that any potential dilution impact should be measured against, among other factors, “the dire financial situation of the group, which remains in need of funding to complete The 13 Hotel.”

 

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