Wynn Macau Shares Decline After Bond Issuance Plans

Wynn Macau Shares Decline After Bond Issuance Plans

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.

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