Wynn Macau Ltd. shares fell Friday after the company announced plans to issue convertible bonds, a move that analysts say is an effort to strengthen its balance sheet.
The casino operator’s shares fell as much as 7.2% to 8.00 Hong Kong dollars (US$1.02) and were last 5.1% lower at HK$7.67.
Wynn Macau said Friday that it plans to raise US$600 million via the issuance of 4.50% convertible bonds due in 2029. The casino operator said the bond’s conversion price is HK$10.24 a share, a 27% premium over Wynn Macau’s Thursday closing price of HK$8.08.
Net proceeds from the bond issuance are expected at US$586 million, and will be used to boost liquidity and for general corporate purposes, Wynn Macau added.
In a note, Citi analysts George Choi and Ryan Cheung said they expect the proceeds to be used to partially repay a US$1.5 billion loan, which was fully drawn down at the end of last year, when the weighted average interest rate was around 7.30%.
The corporate bond issuance is an “opportunistic move” for Wynn Macau to improve its balance sheet, Citi said. The analysts estimated that the casino operator’s end-2024 debt-to-Ebitda ratio will fall to 7.0x from 7.7x if the casino operator fully converts the bonds.
Meanwhile, JPMorgan analysts DS Kim and Mufan Shi said in a note that they think the timing of the issuance is “disappointing, but it’s not thesis-changing and we stay bullish on the sector.”
While the JPMorgan analysts said they were caught “off-guard” by the timing, they noted that Wynn Macau has a US$600 million bond due 2024, which, coupled with a higher capital expenditure requirement with its new license, could be why the company is trying to beef up its balance sheet.