Inside Asian Gaming

INSIDE ASIAN GAMING | July 2009 26 T he prospect of foreign casino companies with Asian operations raising equity in Hong Kong looks like a must-grab opportunity. It may be one of the few cost effective ways currently commercially available of relieving the pressure on their balance sheets. That pressure has been caused by an unprecedented amount of spending on infrastructure in Macau, combined with economic downturn of varying degrees in all the operators’ key markets. Set against the still-neurotic mood of global debt markets and the persistently high price of debt, Hong Kong’s stock market looks positively sunny. Goingdown the initial public offering route does however have financial risks both for issuers and investors. There remain significant signs of volatility even in Asian equity markets and no clear indication yet that the bottom of the bottom has been reached. In the early weeks of the financial crisis many casino operators, in common with other companies in other sectors, were naturally focused on making sure they could keep the business together as a going concern. That meant in many cases financial fire fighting in order to meet existing debt repayment schedules and covenants. This avoided the dread prospect of company credit worthiness being re-rated downward. That could potentially have led to a vicious downward circle of rescheduled loans at higher or even commercially unsustainable prices. Magic words Theominousphrase‘goingconcern’came up at least twice in the industry in relation to casino operators with a Macau presence. The first time was in November last year in a US Securities and Exchange Commission filing from Las Vegas Sands Corp. (LVS), quoting the company’s auditors. The second time was this year in relation to MGMMIRAGE, the 50:50 joint venture partner with Pansy Ho in the US$1.25 billion MGM Grand Macau. The corporation had warned in March that its auditors might include the language in its annual report. Special Offer Cash-hungry foreign casino companies could benefit from an upturn in Asian equity markets