Stephen Hung (second from left) signed a deal with Rolls Royce in 2014
Luxury builder 13 Holdings Ltd. has a fleet of 30 bespoke Rolls-Royce Phantoms for its hotel project in Macau, but no guests to ride in them.
That’s because the company has yet to receive a license to operate the exclusive The 13 project in Macau’s Cotai Strip, despite saying in 2016 that it expected to do so by the end of that year. The firm announced its fourth straight year of net losses yesterday as it considers trying to change conditions on its loans amid the delay. 13 Holdings has total debt of about HKD4.5 billion, more than 10 times its bank balances and cash of HKD323.6 million, according to its filing.
13 Holdings announced it would build the hotel in 2013, which was when total gambling takings for Macau peaked at a record USD45 billion. After that, the world’s biggest gambling hub suffered a three-year slump in gaming revenue amid China’s anti-corruption crackdown and slowing economy. While there has been some recovery for the industry this year, risks remain. Macau’s government announced plans in May to require facial recognition and identification card checks at ATMs, to curb money laundering and stem outflows.
“13 Holdings’ debt problems are emblematic of the issues that gaming-related companies in Macau face in light of China’s anti-corruption crackdown,” said Thomas Dillenseger, Hong Kong-based managing director at restructuring firm Alvarez & Marsal. Some companies related to Macau’s gaming industry have seen a significant decline in revenue, he added.
The Hong Kong-listed shares of 13 Holdings reversed course to close down 7 percent, the sharpest drop in a year. They had earlier advanced as much as 1.6 percent.
Certain terms in a bank borrowing of about HKD3 billion outstanding as of March 31 “require the opening of the group’s hotel in Macau to be no later than July 31,” the firm said in an exchange filing. “If in mid-July the group anticipates that the hotel cannot be opened according to the above schedule, the directors of the company will obtain an extension of the opening date under this covenant.”
The luxury builder, which took delivery of the fleet of Phantoms last year, had successfully applied in mid-March for an extension from March 31 to July 31, according to the filing. The company said it doesn’t expect any application for a further extension to be withheld by the bank, which it didn’t identify.
The occupation permit for the hotel was issued by the Macau government on March 29, and the company “is now in the process of obtaining necessary licenses and approvals for operation of the hotel and related activities,” it said. The company said the hotel and entertainment complex that it’s building is expected to open in the second half of this year.
13 Holdings’ joint chairman is Stephen Hung, formerly the co-head of investment banking for Asia at Merrill Lynch.
The hotel builder said it is negotiating with commercial banks, other financial institutions and certain shareholders to secure new sources of funding in the form of debt and equity. It added that it has received offers of financing in excess of its net current liabilities and that based on the negotiations, the directors are confident the group “will secure sufficient funds” to support its working capital requirements for the next 12 months.
The group is also negotiating with a lender that it didn’t identify for the extension of a maturity date on a borrowing of HKD300 million outstanding as of March 31, which falls due on July 12. Based on the negotiations with the lender, the directors of the company believe that the lender will approve an extension of the repayment date in stages, up to a latest date of April 1, 2018, subject to progress on securing certain funding.
A representative for 13 Holdings wasn’t able to immediately comment. Denise Wee, Daniela Wei, Bloomberg
No Comments