Wynn Macau Ltd has outlined plans to issue US$500 million of convertible bonds due 2029, with the option to upsize by another US$100 million, as it looks to shore up liquidity among Macau’s ongoing recovery story.
CBRE Equity Research analyst John DeCree said the bonds would likely be used to repay the company’s US$600 million of 4.875% notes due 2024, which would “effectively reduce annual interest expense and kick out the maturity five years in exchange for a potential equity issuance up 40%.”
He also described the financing as “front-footed amid the volatile global capital markets environment.”
In an update filed early Friday morning, Wynn said the new bonds, to be issued at an initial Conversion Price of HK$10.24 per share, will be convertible into 459,774,985 shares representing approximately 8.8% of the total issued share capital of the company and 8.1% of its enlarged issued share capital.
Proceeds from the offering are estimated at US$586 million and will be used for “general corporate purposes”.
As part of its announcement, Wynn Macau also provided details of its performance through the first two months of 2023 following the 8 January easing of Macau and mainland China border restrictions.
In particular it revealed that mass market table drop had recovered to 82% of corresponding 2019 levels during the four-week period post-CNY, while direct VIP turnover is 20% higher than the same period in 2019. Tenant retails sale are also 78% higher than the same four-week period pre-COVID.
Based on this information, Wynn Macau said it anticipates total operating revenues at its two Macau integrated resorts to have reached between US$391 million and US$395 million for the two-month period ended 28 February 2023, up by around 75% from US$225.1 million in January and February 2022.
Adjusted EBITDA is also expected to have climbed from just US$4.5 million during the same period last year to between US$94 million to US$98 million in January and February 2023. That’s despite VIP table games win percentage negatively impacting EBITDA by around US$13.3 million.
“Additionally, based on data from the Macau DICJ, we estimate our hold-normalized gross gaming revenue market share during the two-month period ended 28 February 2023 was approximately 15.0%, which was above 2019 levels, despite the meaningful changes in the junket VIP environment,” it said. Wynn Macau held 14.8% market share in FY19.
Assessing the numbers in a Friday note (Asia time), DeCree said Wynn Macau’s Adjusted EBITDA estimates for January and February was already well above market consensus of US$66 million for the entire quarter, with average daily EBITDA running at US$1.63 million per day.
Adjusting for poor hold, this translates to an annual EBITDA run rate of US$675 million.
“However, the first two months were skewed by the CNY holiday which averaged US$4 million of EBITDA per day,” DeCree explained. “Excluding CNY, we estimate an annual EBITDA run rate of US$516 million to US$600 million.”
The analyst described Wynn Macau’s earnings flash as “considerably better than expected”, adding, “Ultimately, the US$500 million+ convert will firm up Wynn Macau’s balance sheet, provide liquidity and the means to address upcoming maturities, and eliminate future capital markets risk.”
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