Wynn Resorts changes 2023 bonds terms to avoid debt buyback

It has become apparent to industry analysts that Wynn Resorts intends to raise the change-of-control trigger to 50 percent from its current lower level, given that the company is offering holders of the 2023 notes $10 million collectively to agree to the change. The aim of the operator is to change terms on some of its bonds to protect the company from being forced to buy back debt, as the company’s USD500 million of notes maturing in 2023 are trading at around 99.9 cents -down 2 cents on the dollar since the allegations of sexual misconduct against Steve Wynn were published-. Regulators in Nevada and Macau, where Wynn Resorts owns casinos, are investigating, as are officials in Massachusetts, where the company is building a $2.4 billion complex.

A possible debt buyback would stem from a provision in the notes known as a “change-of-control” put. Under the proviso, if any stockholder acquires more shares than those of Steve Wynn and his related parties, then Wynn Resorts will be forced to buy back some of its bonds from investors at 101 cents on the dollar.

An investor obtaining more stock than Steve Wynn and his related parties is a “real risk” for the company, according to Alexander Diaz-Matos, an analyst at credit research firm Covenant Review. “It’s very different than having any person acquire more than 50 percent of Wynn, which I don’t think is in the cards.”

But other bondholders may get hurt by this change if it goes through, Diaz-Matos said. The notes due in 2025 and 2027 have change-of-control provisions that can be triggered if either a shareholder buys more than 50 percent of the company, or another set of the company’s bonds has a change-of-control event triggered. If the 2023 notes lose their lower threshold, then the 2025 and 2027 notes are also less likely to have the provision triggered, Diaz-Matos said.

Owners of the debt maturing in 2023 have until Feb. 27 at 5 p.m. in New York to decide if they’ll accept the offer, according to the statement proposing the amendment. It’s expected that they’ll do so, according to two people with knowledge of the matter, who asked not to be identified as the discussions were private.

At the heart of the legal fight is a 2010 agreement that gave Steve Wynn control over Elaine Wynn’s and Okada’s shares. This month, he agreed to give up the control he had over Elaine’s portion and has also said that the pact no longer binds either party, meaning she can sell her 9.4 percent stake.

Okada argues that the 2010 agreement is still in effect, and Wynn cannot discharge his ex-wife from it. A Nevada state court judge will hold a hearing March 2 on the matter.