Genting Malaysia Berhad (GENM) is a potential 'naughty company'with a cash horde of close to RM5 billion. It will definitely do something with it for profit either actively or passively.And so we see the first action being unleashed;though a passive one.
To beef up its burgeoning coffers, GenM through its wholly owned subsidiary, Resorts World Limited has subscribed to the First Mortgage Notes in Wynn,Las Vegas LLC and Wynn Las Vegas Capital Corporation. Based on an exchange rate of RM3.3675 : US$1.00, Resorts World Limited, has on 20 October 2009 completed the subscription to US$15 million (approximately RM50.51 million) nominal amount of these Notes.The total amount of First Mortgage Notes issued was US$500 million in aggregate principal amount at 7.875% returns due 2017.
The Notes, issued at a discount of 97.823% of par, were offered by Wynn as part of a private placement of US$500 million in aggregate principal amount of the Notes and the proceeds will be used by Wynn to part settle some of its outstanding debts and for general corporate purposes.
The Notes are secured by a first-priority lien on substantially all of the existing and future assets of the Issuers, and subject to the approval of the Nevada Gaming Commission. The Notes are senior secured obligations of the Issuers, guaranteed by certain of Wynn Las Vegas, LLC’s subsidiaries, which also guarantee Wynn’s other senior indebtedness; and equal in right of payment with, or senior to, all existing or future indebtedness of Wynn and each of its guarantors.
For GenM, investment in these Notes represent a good opportunity to expand its investment portfolio and to enhance returns on its existing cash balances. With yield returns in excess of 8%, the investment generates an attractive return compared to what is currently attainable in the money markets or in other secured investments regionally, especially within the GENM group's core leisure and hospitality industry. Further, the Notes are secured against quality gaming and entertainment assets in Las Vegas.
The subscription to the Notes is not expected to have a material impact on the net assets or earnings per share of the GENM group for the financial year ending 31 December 2009.
Wynn is one of the leading casino entertainment providers in the United States, owning and operating two properties located in Las Vegas, Nevada. Wynn also owns and operates Wynn Macau in the Macau Special Administrative Region of the People’s Republic of China. For the financial year ended 31 December 2008, Wynn group recorded net revenues of approximately US$3 billion.
On 9 October 2009, Wynn completed a successful Initial Public Offering for Wynn Macau on the Hong Kong Stock Exchange, raising over US$1.87 billion in new equity.
The subscription to the Notes is prohibited under Paragraph 8.23 of the Listing Requirements ("LR") of Bursa Malaysia Securities Berhad ("Bursa Securities") and Paragraph 2.2 of Practice Note No. 11/2001 of the LR. Accordingly, the approval of Bursa Securities was sought and subsequently obtained on 13 October 2009 for GENM to subscribe to US$15 million nominal amount of the Notes, subject to the condition that GENM releases an announcement to Bursa Securities on the same.
So it looks like a passive inroad into the Wynn Casino Group has happened,opening possibilities for active participation of some Genting units into the casino activities in both Nevada and Macau.
For GenM shareholders, potential windfalls can be seen from fiscal year 2010 up to 2018 in terms of monetary returns.
Do they dare dream that GenM will strike out on other more active participation in the near future? For that we await Father Time to tell us all.
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