Melco Resorts Finance Limited, the wholly-owned subsidiary of Melco Resorts & Entertainment that operates Macau integrated resorts City of Dreams and Altira Macau, has announced plans to raise US$500 million via an offering of senior notes.
Proceeds of the 5.750% senior notes due 2028 will be used to make a repayment of the principal amount outstanding on the revolving credit facility under a senior facilities agreement entered into by MCO Nominee One Limited, a subsidiary of Melco Resorts Finance, on 29 April 2020 and for general corporate purposes, Melco said.
The offering comes just a week after another Melco Resorts subsidiary, Studio City operating entity Studio City International Holdings Ltd, announced its own US$500 million fund raising plan via a series of private placements.
Ratings agency Moody’s said on Tuesday that the notes issuance by Melco Resorts Finance and equity offering by Studio City International Holdings will further strengthen Melco Resorts’ group-wide liquidity.
“Melco Resorts & Entertainment’s liquidity sources, including its consolidated unrestricted cash of US$1.2 billion at the end of March 2020, a new US$1.9 billion five-year revolving credit facility and proceeds of about US$355 million from the disposal of its stake in Crown Resorts Limited provide adequate cushions against potential cash burn at least for the next 12 months,” Moody’s said.
However, with Melco reporting a 41% decline in revenue to US$811 million and 86% fall in EBITDA to US$55 million in 1Q20, there remains some risk.
“Moody’s expects negative EBITDA for the company for the second quarter of 2020,” it said.
Weakened earnings, coupled with the group’s planned capital spending, will result in significant negative free cash flow and an increase in net debt until sufficient recovery takes hold.
“While Moody’s expects MRE’s earnings and cash flow to improve gradually from the second half of 2020 once disruptions ease, the company’s financial metrics in 2021 will likely fall short of 2019 levels. Also, there is significant downside risk to this recovery assumption.”