Wynn Resorts to tighten loan safeguards on Macau casino boom

This gaming company is dealing its existing lenders a good hand, in a rare example of a junk-rated corporate actually increasing safeguards on a loan.

Wynn Resorts (Macau) SA wants to tighten the financial conditions on a USD3.05 billion-equivalent facility, providing stronger protections to banks, according to people familiar with the matter, who aren’t authorized to speak publicly and asked not to be identified. That’s unlike some other borrowers, which have sought looser terms.

The casino company has had a tumultuous start to the year, with founder Steve Wynn stepping down in February as chairman and chief executive officer amid sexual-misconduct allegations that regulators are still investigating. That hasn’t stopped a jump in revenues at its two flagship resorts in Macau, as the world’s biggest gaming hub booms. Wynn Resorts will announce first-quarter earnings on April 24.

“Wynn Macau is experiencing significant growth in cash flows as its Wynn Palace property is making outsized market share gains,” said Grant Govertsen, an analyst at Union Gaming Securities Asia in Macau. “Given the recent management turmoil at Wynn Resorts, this move would go far to assure investors that operations remain strong.”

Galaxy Entertainment Group Ltd. agreed to buy an almost 5 percent stake in Wynn last month. Analysts speculated the deal positions Galaxy as a potential suitor if Wynn were up for sale, and may put Wynn in a more favorable position when regulators consider renewing its casino license.

Combined gross gaming revenue at the Wynn Macau and Wynn Palace integrated resorts rose 21 percent in January and February from the year-earlier period. Macau casino revenues in March jumped 22.2 percent year-on-year, compared with estimates for a 17 percent gain.

Wynn Resorts is cutting the maximum leverage ratio, a measure of total debt relative to earnings before interest, taxes, depreciation and amortization, for the loan to four times from 2020 onwards, while seeking to extend the maturity, said the people. That’s down from multiples of 4.75 in 2018 and 4.25 in 2019. The commitment deadline for the amendments is May 18.

To further sweeten the deal for lenders, the casino operator will also pay an extra 12.5 basis points to banks that lend more when other parties leave the loan, according to people familiar with the matter. The fee is in addition to the 25 basis points for accepting all the amendments, the people said. MDT/Bloomberg