Melco gets financial relief from lenders 

by William Brown Last Updated
Melco gets financial relief from lenders 

It’s been a trying year for many casino operators, but for Melco Resorts it’s been particularly difficult.

Calvin Ayre reports the operator lost $331 million in the third quarter and the fourth quarter is not shaping up to be much better.

Melco said its activity in Manila and Cyprus was helping to shore up its finances, but Cyprus has since taken a step backward and two Melco casinos were temporarily closed two weeks ago.

With more financial restraints on the way, the company has reached out to its lenders for relief and been granted it.

The wholly-owned Melco subsidiary that is responsible for the company’s City of Dreams Macau and Altira Macau, Melco Resorts Finance Limited, reported last Friday that it had worked out a deal with lenders to renegotiate some terms associated with credit lines it received earlier this year.

At the end of April, the company received a revolving credit facility worth $1.92 billion from a group of financial institutions, which Melco wanted to use to increase its liquidity throughout the ongoing coronavirus pandemic.

MRFL’s own subsidiary, MCO Nominee One Limited, worked with the lenders to reach a new arrangement for the credit and most of them were amenable to the alternatives.

The MRFL announcement didn’t specify who agreed and who didn’t, but explained that it had received confirmation that it could waive several covenants in the agreements, including the need to “meet or exceed the cover ratio, the ratio of consolidated EBITDA to consolidated net finance charges as such terms are defined in the Facility Agreement, of 2.5 to 1.00”, to “not exceed the senior leverage ratio of 3.5 to 1” and to “not exceed the total leverage ratio of 4.5 to 1”.

In order to receive approval for the changes, Melco’s MCO Nominee One subsidiary had to pay a “customary fee” to all of the financial institutions that approved the deal.

However, it didn’t specify how much was paid.

Melco has been spinning its wheels this year, using a senior notes offering that attracted $500 million in July to pay $352.2 million of the principal amount due on credit facilities it received in 2020.

The company went from having net income of $93 million in the third quarter of last year, to a net loss of $302.4 million in the third quarter of this year, and the new credit arrangements are most likely only going to allow it to barely keep treading water until it can emerge from the global pandemic.

Melco sells Crown shares to US-based group

Casino investor Melco Resorts and Entertainment has sold its 9.99 per cent stake in Australian gaming operator Crown Resorts to an entity “owned or managed” by US-based asset management firm The Blackstone Group.

GGR Asia reported in April that the sale was at a 37.3 per cent discount compared to the price Melco paid in May last year.

In a Wednesday filing to the Australian Securities Exchange, Crown Resorts said it had been informed that an entity linked to The Blackstone Group had acquired 67,675,000 Crown Resorts shares from Melco Resorts – representing its entire stake.

The shares were sold at a price of A$8.15 per share.

The sale amounted to more than half a billion dollars in aggregate.

In May last year, Melco Resorts said it was paying A$13 per Crown share to CPH Crown Holdings.

The latter company, controlled by Australian businessman James Packer, was a major shareholder in Crown Resorts.

The acquisition price per share represented an aggregate investment of nearly A$879.8 million for the 9.99 per cent stake in Crown Resorts.

The management of Melco Resorts had already flagged earlier this year the sale of the Crown Resorts stake was a “potential source of liquidity” in case Melco Resorts had additional “capital needs”.

When it first announced the deal, Melco Resorts was to acquire a 19.9 per cent stake in Crown Resorts, in a deal valued at A$1.76 billion.

In February, Melco said it had decided not to pursue the purchase of a second tranche of shares in the Australian company because of the “impact of the coronavirus pandemic”.

The latest announcement comes amid an inquiry into Crown Resorts’ suitability to hold a gaming licence in New South Wales.

The company is currently developing a casino complex at Barangaroo in Sydney.

The New South Wales gaming regulator had launched a public inquiry into the Melco Resorts deal, as well as to probe whether Crown Resorts breached the terms of its gaming licence for its Barangaroo project.

The inquiry has been temporarily halted due to the coronavirus pandemic.

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