International edition
June 23, 2021

The company will issue zero-coupon notes due 2015

SJM to sell convertible bonds to fund Macau casinos

(Macau).- SJM Holdings Ltd., billionaire Stanley Ho’s casino holding company, plans to raise us$ 258 million selling convertible bonds to fund operations in Macau as revenue rebounds in the world’s biggest gambling hub.

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he company will issue zero-coupon notes due 2015 that can be converted into 373.8 million shares at an initial price of us$ 0.69, it said in a regulatory filing in Hong Kong today. That’s 20 % higher than yesterday’s closing price.

SJM is raising funds even as its 87-year-old chairman lies in hospital, where he’s been since at least early August, without naming a successor. Macau’s biggest casino operator by market share joins Wynn Macau Ltd., a unit of the gaming company founded by billionaire Stephen Wynn, which may raise us$ 162.5 million from an initial public offering to help finance expansion in Macau.

“Investors may be concerned that upcoming IPOs are not doing that well and Wynn’s IPO may also affect the overall perception of the entire sector,” Gabriel Chan, a Hong Kong- based analyst at Credit Suisse Group AG, said today in a phone interview. “SJM may have wanted to raise funds before that.”

SJM fell 2.7 % to us$ 0.55 in Hong Kong trading today, trimming its gain this year to 157 %. The benchmark Hang Seng Index fell 0.13 %.

Ho is out cycling every day, according to a September 19 Ming Pao report that cited his daughter, Pansy Ho. The billionaire will switch “within days” to another Hong Kong hospital to continue post-brain-surgery treatment, Apple Daily reported today, without saying where it got the information.

Karen Lee, a spokeswoman for the tycoon’s Shun Tak Holdings Ltd. said August 5 that Ho was recovering from surgery, without specifying what kind of operation. Janet Wong, Stanley Ho’s spokeswoman, couldn’t be reached for comment on her office and mobile phones and hasn’t responded to an e-mail seeking comment.

“Stanley’s health condition is a big concern for some investors, even though the company itself is run by a team of professional managers,” Chan said. “The question remains that if Stanley’s not around then would relationships with junket operators in Macau be lost? If Stanley comes out of hospital looking healthy then that would help the share price.”

Junket operators bring high rollers to casinos, enticing them with perks and providing credit. They are paid commissions based largely on the amount the so-called VIP gamblers spend on non-negotiable chips, which can’t be converted back to cash.

Macau earlier this month limited the commissions paid to the agencies to 1.25 %, helping casino operators reduce costs. Las Vegas Sands Corp., SJM and the four other operators in the only place in China where casinos are legal had set up a coalition to work together and Ho has said the commissions were too high and should be limited to 1.25 %.

Stephen Wynn on September 23 said China eased travel restrictions on Guangdong province residents who wish to visit the Macau gaming hub. More than half the former Portuguese colony’s tourists come from China.

Macau’s gambling revenue, which includes income from horse and greyhound racing and lotteries, rose to a record us$ 1.4 billion in August from a year earlier, Portuguese news agency Lusa reported September 1, triggering speculation that China has already eased curbs.

Macau’s gambling revenue had annual declines from December to June. About 99 % of the city’s gambling revenue comes from casinos. The Macau Gambling Index has surged 129 % this year amid optimism the revenue decline is over.

SJM rival Galaxy Entertainment Group Ltd., which has more than tripled in value this year, fell 3.2 % to us$ 0.43. Melco International Development Ltd., controlled by Ho’s son Lawrence, fell 3.8 % to us$ 0.67, paring this year’s advance to 105 %. The two other casino operators in Macau are Wynn Resorts Ltd., run by billionaire Stephen Wynn and MGM Mirage, whose largest shareholder is Kirk Kerkorian.

SJM will raise a net us$ 252 million from the convertible bond sale with help from Deutsche Bank AG, according to its filing. Money raised will be used to boost capital and for operating expenses. Should the notes be converted fully into stock, they will represent about 7 % of the company’s enlarged share capital, the filing shows. Champion Path Holdings Ltd., a SJM- owned company, will sell the bonds and SJM Holdings Ltd. will guarantee them.

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