Inside Asian Gaming

inside asian gaming November 2015 16 Cover Story owned by US hedge fund Silver Point Capital, with Oaktree Capital Management, another US hedge fund, holding a minority stake. David Friedman, former general counsel for Las Vegas Sands, who formed New Cotai with other LVS alumni, brought these investors together. Friedman provided its strategic vision, while the hedge funds were just looking for returns. Melco Crown would later agree to have the casino operate under its gaming concession. With these cast members and an estimated budget of HK$16 billion (US$2.1 billion), Macau Studio City would have likely been the second integrated resort in Cotai and the first with international hotel brands. The project broke ground on January 10, 2007, and eSun broke the project into another piece, selling 20% to Singapore’s CapitaLand for US$100 million. Lai Sun had previously partnered with CapitaLand to redevelop Hong Kong’s Furama Hotel site. The new investor gave Studio City four equity holding management groups – though CapitaLand worked in tandem with eSun – as it sought to finance the project. eSun wanted to go to banks, newly keen to lend to casino projects, to borrow the estimated $1.5 billion needed to complete Studio City. New Cotai said it could finance its portion without loans, employing hedge fund capital. But eSun found it couldn’t borrow without the cash flow from the casino, which belonged to New Cotai. eSun tried to restructure the deal or buy out New Cotai, but sources say New Cotai contended its 40% of Studio City with the casino was worth more than eSun’s 60% without it. The two sides couldn’t reach a deal, and their agreement reportedly didn’t have a deadlock provision to resolve disputes. Then came the global financial slump of 2008-09 and Macau’s slump, drying up lending interest and leaving the project at a standstill. Defections began. Taubman dropped out of the project in August 2009 and Playboy turned tail that November. Hotel partners exercised opt-out clauses as the project languished. Macau’s then-Chief Executive Edmund Ho summoned the parties for a meeting in September 2009, hoping to get the project moving before he left office that December. The parties resumed negotiations, their first in a year according to one David Friedman