Inside Asian Gaming

43 42 Regional Briefs SJM IPO Postponed Sociedade de Turismo e Diversões de Macau (STDM) will post- pone until July the launch of the HK$15 billion initial public offer- ing (IPO) of its gaming subsidiary, Sociedade de Jogos de Macau (SJM), according to Hong Kong-daily South China Morning Post. The newspaper cited unidentified market sources as saying that STDM, controlled by Macau gambling magnate Stanley Ho, is also reviewing plans to inject all the gaming unit’s 16 casinos into a Hong Kong vehicle, 20% of which will be sold to the public. The IPO will be delayed by a month because of court proceedings concerning the legitimacy of the offering. The newspaper reported that Stanley Ho’s estranged sister,Winnie Ho, challenged STDM’s deci- sion to proceed with the IPO after her representatives were barred from attending a meeting of shareholders in March that approved the offering. Cirque du Soleil Coming to Cotai Las Vegas Sands Corp (LVS) and Cirque du Soleil announced they will create a one-of-a-kind show to be featured on the Cotai Strip.The new show, conceived and created solely by Cirque du Soleil will open in the Spring of 2008 in a theatre built to their specifications and will have a capacity of approximately 1,800 seats. The deal outlines plans for Las Vegas Sands to develop and own the 1,800-seat theatre as well as operate the food and beverage concession stands. The design of the theatre and creative and artis- tic decisions surrounding all show elements will be the domain of Cirque du Soleil. In addition to the new Cirque du Soleil theatre, the Cotai Strip is expected to feature five other entertainment venues including a 15,000 seat arena that LVS hopes will stage performances by some of the world’s biggest stars. LVS also announced it had negotiated and signed contracts for five multi-year trade shows representing 13 separate events to be hosted on Cotai. The multi-year trade shows include the Asian Auto- motive Aftermarket Products Expo,the CMP Asia Jewellery andWatch Show and the Global Gaming Expo Asia. Additionally, LVS said it has received several new letters of intent from other trade show organiz- ers and is working with a large pipeline of shows which it expects to sign up by the end of 2006. Philippines Steps Up Jueteng Crackdown Philippine National Police Chief Director General Arturo C. Lomi- bao ordered a massive strike against all forms of illegal gambling in the country in the wake of persistent reports that jueteng (an illegal numbers game popular in the country) had resumed in some parts of Luzon. From January 1 to May 18 this year, the Philippine police arrested 2,698 people for involvement in illegal gambling, and at least 30 po- lice unit commanders including three provincial directors, 22 chiefs of police and five police-community precinct commanders have lost their jobs during the course of the crackdown. Jueteng relies on having a large number of wagers, and there is no limit to the amount of bet. Gamblers select two numbers from 1 through 37, and the winning number is determined by selecting a pair of numbers from a set of 37 numbered balls – putting the theo- retical odds of winning on any one play at 1 in 666. Despite the efforts of the government and community leaders to stamp out jueteng in the Philippines, the game remains pervasive due to its vast popularity, the poverty which cripples the country, and the wealth and power of the jueteng operators. Jueteng was brought to notoriety in 2000 during the impeach- ment proceedings of deposed Philippine President Joseph Estrada, who was accused of receiving illegal payoffs from gambling profits. Another political scandal erupted in June 2005 involving allegations that relatives of Gloria Macapagal-Arroyo received payouts from jueteng operators. eSun Takes on Partners Silver Point Capital, a US fund with US$5 billion under manage- ment, in partnership with David Friedman, a former aide to Las Ve- gas Sands Corp (LVS) Chairman Sheldon Adelson, will invest up to HK$2.97 billion for a 40% stake in a project controlled by Hong Kong- listed eSun Holdings, the media and entertainment arm of property group Lai Sun Development. The partners plan to invest about HK$15 billion in a casino resort on Macau’s Cotai Strip. The planned casino is expected to open in 2009 with up to 500 gaming tables, 4,000 hotel rooms, a film studio and exhibition facilities. The group will pay the government about HK$6 billion for a 14 hectare site. The partners, with working capital of about US$800 mil- lion, will raise the remainder of funds for their project from other sources, including high-yield bonds. The partners are currently in negotiations with Macau gaming concession holders to operate their planned casino. Under the usual arrangement in Macau, companies give about 20% of their gross gaming revenue to concession holders operating their casinos, with almost 40% going to the government as tax and the companies retaining the remaining 40%. Mr. Friedman claimed the partners would be seeking a different arrangement, but did not offer further details. LVS Gets US$2.5 Billion Macau Loan Las Vegas Sands Corp (LVS) has secured a US$2.5 billion financ- ing package to fund its gaming projects in Macau. The loan, which is provided by six different banks, is regarded as the largest single credit facility ever granted to a non-government entity in China. Hong Kong daily The Standard reported it took LVS six months to secure the loan. The loan will be used to fund the expansion of Sands Macau and construction of the US$2.3 billion Venetian Macau. The Sands expan- sion is due for completion this year, while Venetian Macau is sched- uled to open in mid-2007. A portion of the funds will also go towards building a 400-room Four Seasons hotel next to Venetian Macau on the Cotai Strip. The loan package consists of a US$1.2 billion seven-year term loan, a US$700 million six-year term loan, a US$100 million five-year term loan and US$500 million in a five-year revolving credit line.Gold- man Sachs Credit Partners was the lead provider of the loan package, and was joined by Lehman Brothers, Citigroup Global, Canada’s Bank of Nova Scotia, Portugal’s Banco Nacional Ultramarino and Japan’s Sumitomo Mitsui Banking Corp. It appears LVS will easily secure financing for its Marina Bay Sands project. The International Herald Tribune reported LVS has received between six and nine lending proposals for the project, which will include a 2,500-room hotel, and 1 million square feet each of con- vention and retail space. LVS plans to finance the Marina Bay project without help from the Singapore government. Melco-PBL JV Valuations The casino sub-concession purchased by the joint venture be- tween Australia’s Publishing and Broadcasting Ltd (PBL) and Melco International Development from Wynn Resorts for US$900 million, has been valued at about US$1.36 billion by Hong Kong firm Ameri- can Appraisal, ahead of Hong Kong-listed Melco’s raising of HK$1.2 billion through a share placement on June 1 to fund the JV’s Macau projects. The Melco-PBL JV is also currently negotiating with international banks to raise US$500 in loans, and is pursuing an initial public offer- ing (IPO) on the US Nasdaq stock exchange to raise further funds.The consensus market view is that an expected 20% listing of the JV on Nasdaq will raise US$1-1.6 billion. According to the valuation report, the Melco-PBL JV’s casino li- cense is worth between US$865 million under a worst case scenario, and as much as US$1.928 billion.Without the license, the JV’s casinos would have had to be operated by Stanley Ho’s SJM, and the valua- tion assumes that by purchasing its own license, the JV will be able to retain 12% more of its revenue. American Appraisal estimates the Melco-PBL JV will earn 10-17% of Macau casino revenue, which is forecast by the appraisal firm to grow around 18% each year for the next four years, easing off to 5% a year until 2022. The valuation also assumes no new casino licenses will be issued by the Macau Government. Fairmont and Raffles Join Cotai Line-Up Las Vegas Sands Corp (LVS) announced the addition of properties operated by Fairmont Raffles Holdings International to its develop- ments on Macau’s Cotai Strip. LVS will develop and own a resort com- plex slated to feature 1,500 rooms that will be managed by Fairmont Hotels & Resorts and Raffles Hotels & Resorts,two of the luxury brands owned by Kingdom Hotels International and Colony Capital. Additionally, approximately 300,000 square-feet will be allot- ted for a Raffles-branded residential product. The complex will also feature entertainment and casino gaming facilities as well as retail space connected to adjacent retail malls being developed by LVS. The casino and entertainment facilities will all be owned and oper- ated by LVS. The Cotai Strip is a master planned development of resort and casino properties on Cotai, an area of reclaimed land between the islands of Taipa and Coloane. LVS previously announced plans to develop other hotel projects including The Venetian Macau, which is currently under construction, a Four Seasons hotel, Starwood’s Sheraton and St. Regis brands, a Shangri-La hotel, a Traders hotel and Hilton hotel.