Wynn’s Macau project growing

Thursday, June 10, 2004 | 11:14 a.m.

Las Vegas casino executive Steve Wynn will build a larger resort in Macau than anticipated. On Wednesday he outlined plans for a $705 million resort with a large casino, 600 hotel rooms and retail and restaurant amenities.

In a Securities and Exchange Commission filing Wednesday, Wynn Resorts Ltd. reported details of the company's construction plans in Macau, including disclosures about the company's land deal, the project budget, financing and timetable for construction of Wynn Macau.

Wynn stock was trading at $42.25 a share at midday today, down 77 cents a share, or 1.8 percent, from Wednesday's closing price.

Wynn was one of two American casino companies that won casino concessions to operate in Macau, a former Portuguese colony that reverted to Chinese rule in 1999 and the only place in China where people can gamble in legal casinos. The Macau gaming industry, which produced revenue of $412 million for the 12 casinos operated by Chinese casino executive Stanley Ho in 2003, had operated under a monopoly since 1962 until last month.

In May the other American company that won a concession, Las Vegas Sands Inc., operator of The Venetian hotel-casino in Las Vegas, opened its own Macau operation, a $240 million casino. Las Vegas Sands also plans to build a hotel-casino as the centerpiece to a strip of hotel-casinos in Macau.

Wynn opted to wait for the passage of key credit legislation before detailing construction plans. Those plans exceeded the expectations of some analysts.

The SEC filing said new credit legislation that takes effect July 1 allows casinos to issue credit and enforce gaming debts. It was previously expected that those issues were to be considered in separate pieces of legislation.

That legislation opened the door for Wynn's $705 million project, slightly more ambitious than a project estimated to cost between $575 million and $600 million.

According to the filing, the resort would have 600 hotel rooms, a 100,000-square-foot casino -- roughly the size of the casino at the Aladdin hotel-casino in Las Vegas -- seven restaurants, 28,000 square feet of retail space, a spa, a salon and show rooms and entertainment centers.

Wynn Macau would be built on a 16-acre parcel in Macau's inner harbor area, near the Hotel Lisboa, Macau's largest and best-known hotel-casino. The Hotel Lisboa is operated by Ho, who has held a casino monopoly in Macau for decades.

Wynn is leasing the 16 acres from the government for 25 years with renewal rights. The company will pay the government $4 million a year for 10 years in rent. In addition, Wynn will pay $17 million to the Nam Van Development Co., one of Ho's affiliate companies, to relinquish its rights to a portion of the parcel.

Construction is scheduled to begin June 28 and be completed by September 2006. Wynn's formal concession agreement requires the company to "commence operations of its first permanent casino resort in Macau no later than December 2006."

Wynn has contracted with Leighton Contractors (Asia) Ltd., China State Construction Engineering Ltd., Hong Kong, and China Construction Engineering Co. Ltd., Macau, to operate jointly as general contractor for design and construction of the project.

The filing said under the contract, the builders are responsible for both the construction and the design of the project, other than portions that would be designed by a Wynn Macau affiliate.

Last week Wynn Resorts signed an underwriting agreement with Deutsche Bank AG, Hong Kong, and Sociiti Ginirale Asia Ltd. for a loan of $397 million to finance the development and construction of the project.

The remaining cost of the project will be funded by equity, said a banker familiar with the deal. Wynn Resorts offered 7 million shares to investors last month to raise $268 million. The company said it will use some of the proceeds to finance the Macau resort. Its shares have risen 54 percent this year.

The underwritten senior debt facility includes a term loan of $382 million, which can be borrowed either in U.S. or Hong Kong dollars, and a working capital facility of $15 million (U.S.), which can be borrowed in either Macau patacas or Hong Kong dollars, the SEC filing said.

The term loan is expected to have a term of seven years, the filing said, and the working capital facility would have a three-year term.