Wynn cuts borrowing cost of Macau casino project

Patricia Kuo

Friday, Sept. 16, 2005 | 9:52 a.m.

Wynn Resorts Ltd. this week cut the borrowing cost for its Macau gaming project amid bank demand for investment opportunities.

Wynn Resorts' lenders agreed to cut the interest on $764 million of loans to fund its $1.1 billion venture in Macau as banks offered to lend more than it sought. Gaming companies including MGM Mirage and Las Vegas Sands Corp. are spending more than $12 billion on new casinos in the former Portuguese colony near Hong Kong that ended a casino monopoly in 2001.

Macau may overtake Las Vegas this year as the world's biggest gambling center by revenue after generating $5.1 billion from gaming business in 2004, according to the territory's gaming control board. The Las Vegas Strip had $5.3 billion in revenue last year, according to the American Gaming Association.

The Wynn Macau loan "sets the benchmark for financing that will follow in the gaming, leisure and property sector in Macau," said Ashley Wilkins, head of project finance at Societe Generale's Corporate & Investment Banking Asia in Hong Kong.

Las Vegas-based Wynn will get $744 million from a dual- currency loan arranged by Bank of America Corp., Deutsche Bank AG and Societe Generale. It's also borrowing HK$156 million ($20 million) from Banco Nacional Ultramarino SA, a unit of Caixa Geral de Depositos SA, Portugal's biggest bank, the arrangers said in a news release Sept. 14.

Wynn asked for a lower loan rate after the transaction was about 1.5 times subscribed, a request accepted by all of the 28 lenders, said David Gore, managing director of project finance at SG Corporate & Investment Banking in Hong Kong.

The loan is the first in Asia to have its interest margin cut during its syndication among a wider group of banks, the arrangers said. The credit is made up of a six-year $729 million portion and a two-year HK$117 million piece.

Wynn will initially pay an interest margin of 3 percentage points over the London interbank offered rate for the $729 million portion, Gore said. The rate falls to 2.75 percentage points when the casino opens in the third quarter of 2006 and may decline to 2 percentage points after the project's second phase in 2007, depending on Wynn's debt to earnings ratio.

Wynn initially agreed an interest margin of 3 percentage points throughout the life of the loan, Gore said.

Wynn, 63, in April opened the $2.7 billion Wynn Las Vegas, the world's most expensive casino. He sparked a decade- long Las Vegas revival starting in 1989.

The company paid a margin of 3.5 percentage points for a seven-year portion of a $397 million loan signed in September, Bloomberg data show, which will be replaced by the new credit.

Wynn will pay 2.5 percentage points over the Hong Kong interbank offered rate for the two-year HK$117 million loan.

Three-month Libor, an average of rates set daily by banks and used as a borrowing benchmark, was 3.88 percent Thursday. Three-month Hibor was set at 3.84 percent Thursday.

Standard & Poor's rates Wynn's long-term debt B+, four levels below investment grade.