Galaxy Entertainment completes Cotai project financing plan

Hong Kong-listed Galaxy had originally said the financing plan for Galaxy Macau would be completed by the end of 2009, and the subsequent lack of clarity has weighed on the company's share price since.

The company, one of six licensed to operate casinos in Macau, delayed its Cotai project in November 2008 at the height of the global financial crisis, citing weak market conditions. As the global economy recovered, however, it disclosed in November last year it planned to complete the delayed project by the first quarter of 2011. It reaffirmed Monday the project is on track to open in early 2011.

Responding to questions at a news conference on whether the Macau government's recently announced cap on gambling tables will affect the project, known as Galaxy Macau, Galaxy Deputy Chairman Francis Lui said the company is in talks with the government and is confident the project will have sufficient gambling tables. "We don't believe the Macau government will limit our development. It's not in its interest," Lui said.

Galaxy said Monday it secured a six-year us$ 1.1 billion loan from a consortium of Asian banks and that the terms of the loan, with a prevailing interest rate of 4.5 percentage points above Hong Kong interbank offered rates, represented the "lowest cost of capital available in the current market." It added the funding exercise should be completed by the end of April. "Given we're just coming out of the financial tsunami, this is a great deal which saves us hundreds of millions versus a bond offering," said Chief Financial Officer Robert Drake.

Banks participating in the loan include Bank of China Ltd. through its Macau branch, Industrial & Commercial Bank of China (Macau) Ltd., DBS Bank Ltd., HSBC Holdings PLC's Asian unit, Hang Seng Bank Ltd., Banco Nacional Ultramarino and Guangdong Development Bank, the company said.

"Financing plan finalization and a potentially good (full-year earnings) result scheduled to be released on April 20 would potentially trigger a share re-rating," Nomura analyst Kenneth Fong said in a note Monday morning.

When completed, Galaxy's casino resort in Cotai -an area of reclaimed land between two outlying islands off the Macau peninsula -will have the capacity to host 600 gambling tables and 2,200 luxury hotel rooms, suites and villas in a 550,000 square meter facility.

Construction is now in full swing with more than 2,000 workers on the ground, said Galaxy President and Chief Operating Officer Michael Mecca. Galaxy rival Sands China Ltd., the Macau unit of casino operator Las Vegas Sands Corp., also said late last year it planned to revive work on building hotels and casino complexes in Cotai.

But Sands China last month postponed a signing ceremony with contractors to restart construction of its major casino expansion project. The company declined to elaborate on the delay, even though it had earlier said it planned to get into "high levels of actual construction" starting in March.

The postponement came days after the Macau government announced it would cap gambling tables in Macau at 5,500 until 2013 from the current 5,000, raising questions about operators' major expansion plans. Sands China alone had planned 700 tables for its expansion project, according to CLSA analysts' estimates.