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Wynn Resorts announces restructuring

Tue, Sep 24, 1:14pm by Staff Writer

Wynn Resorts has completed its group restructuring via a stale of $750 million in senior notes and $1.85 billion in new secured credit facilities.

GGR Asia reports the 5.125 per cent senior notes due on October 1, 2029 have been issued by Wynn Resorts Finance – formerly known as Wynn America – and its subsidiary, Wynn Resorts Capital Corp.

Both are indirect wholly-owned subsidiaries of the group, which is also the parent of Macau casino operator Wynn Macau.

According to the most recent relevant filing to regulators in the United States, the issuers of the new senior notes may redeem some or all of them at any time at a redemption price “equal to 100 per cent of the aggregate principal amount of the notes to be redeemed plus a ‘make-whole’ premium and accrued and unpaid interest.”

The latest filing on the financial aspect of the corporate rejig stated: “In the event of a change of control-triggering event, the issuers must offer to repurchase the notes at a repurchase price equal to 101 per cent of the aggregate principal amount thereof, plus any accrued and unpaid interest, to, but not including, the repurchase date.”

On September 11, Wynn Resorts had announced a corporate reorganisation.

Under it, Wynn Resorts Finance will hold the group’s interest in the Wynn Las Vegas and Encore Boston Harbour casino properties located in Nevada and Massachusetts respectively, in the United States.

Wynn Resorts Finance will also hold the group’s approximately 72 per cent controlling interest in Wynn Macau.

The firm had said in a filing on September 12 that cash raised via the new senior notes, along with the $1.85 billion in new senior secured credit facilities that had been announced the day before, would be used to “refinance the existing credit facilities of Wynn Resorts and Wynn American and pay related fees and expenses.”

The Wynn group has committed itself to an outlay of $2 billion on an expansion of its Wynn Palace casino resort in Cotai, Macau.

The group is also a suitor for a casino licence in Japan, and has pledged a large spend on resort infrastructure if it were to win a gaming permit there.

Encore Boston starting strong

The Boston Globe reported in July that during the first 24 hours that Encore Boston Harbour was open there were thousands of people waiting to enter, the nightclub was sold out and there was a wait to bet at the $100-minimum blackjack tables.

At the least, these anecdotes indicate strong demand at the resort early in its existence.

When Wynn Resorts reports earnings, it’ll be important to look at how those crowds translated to revenue in the resorts’ first few days.

Were hotel rooms full, were people gambling, and were restaurants and clubs busy enough to justify the property’s cost.

With a $2.6 billion price tag, the resort needs to generate a lot of revenue to be considered any kind of financial success.

To make a decent return on investment, investors should look for at least $260 million in annualized property EBITDA, a proxy for cash flow at the property.

This would be a 10 per cent EBITDA return on what was invested and is a good benchmark used to assess resorts.

Assuming an EBITDA margin of 30 per cent, that means the resort needs to generate $867 million of revenue per year, or $2.4 million per day.

That’s a big number considering the resort has just 671 hotel rooms, compared with 4,750 at Wynn Las Vegas.

The price of rooms will likely be higher than in Las Vegas and have been going for more than $1,000 per night at times.

There will be a lot of pressure on the hotel, restaurants, clubs and the casino to generate a lot of cash each day.

Since there’s no baseline for a casino near downtown Boston, it’s hard to know what to expect from the property.

But the $2.4 million per day is a good benchmark to watch for – and a lofty goal considering how small the property is.

Wynn’s latest project was shrouded in controversy before it opened as company founder Steven Wynn was embroiled in scandal.


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