he facility will pay interest of 4.5 percentage points more than the Hong Kong Interbank Offer Rate.
The casino operator slowed the pace of construction at the us$ 1.8 billion Galaxy Macau casino resort in November 2008 as the global recession curbed tourist spending. A recovery in casino revenue in Macau, the world’s biggest gambling center, and easier access to funding helped rivals Sands China Ltd. and Wynn Macau Ltd. raise us$ 4.37 billion through initial public offerings in Hong Kong last year.
“The terms of the loan are favorable for Galaxy and it helps cuts their debt-serving costs,” Gabriel Chan, an analyst at Credit Suisse Group AG in Hong Kong, said in a phone interview today. “This is positive for Galaxy because it removes some overhanging concern of them securing capital expenditure for the project.”
The resort is scheduled to open in early 2011. The company is accelerating construction and may have a “soft opening’ as soon as the end of this year, Chairman Lui Che Woo told reporters in Hong Kong today. The facility “fully funds” the resort’s development, Galaxy said.
Galaxy fell 1.3 % to close at us$ 48,2 in Hong Kong trading. The stock has risen 16.5 % this year compared with a 1.2 % gain in the benchmark Hang Seng Index. “The terms of the club loan are significantly more favorable than the group’s existing bonds,” the company said. “This proposed agreement significantly lengthens the group’s debt-maturity profile as well as enhances its financial efficiency and flexibility.”
In club loans, a group of banks deal directly with a borrower and agree among themselves the amount of money each will contribute. Galaxy raised us$ 350 million in December 2005 by selling 9.875 % bonds due to mature in 2012, according to data compiled by Bloomberg.
Galaxy has almost tripled in market value over the past year on a rebound in tourist arrivals in Macau, the world’s biggest gambling hub. Mainland Chinese visitor arrivals in Macau rose 1.9 % in the first two months of this year, according to the China National Tourism Administration. The casino operator’s third-quarter earnings before interest, taxes, depreciation and amortization almost tripled to us$ 35,8 million.
Macau is the biggest revenue generator for Las Vegas-based casino operators Las Vegas Sands Corp. and Wynn Resorts Ltd. and more than half its tourists come from mainland China. The former Portuguese colony is the only place in China where casinos are legal.
Macau in 2006 surpassed Las Vegas as the world’s biggest gambling center by revenue. Punters bet a record us$ 15 billion on card games and slot machines in Macau last year, an increase of 9.7 % from a year earlier.
Galaxy Macau will be able to accommodate 600 casino tables, CFO Robert Drake said today. The resort will contribute a “significant amount” to the company’s balance sheet from 2011, he said.