Macau casino giant SJM Holdings Ltd has initiated a strategic financial maneuver aimed at reshaping its debt profile, announcing a cash tender offer to repurchase all of its outstanding 4.500-percent senior notes. The notes, which carry an aggregate principal amount of US$500 million, are set to mature on January 27 of this year. In a filing submitted to the Hong Kong Stock Exchange on Monday, the operator framed this buyback as a core component of a broader refinancing effort designed to manage the existing liabilities of both the parent company and its subsidiaries.
The offer presents a straightforward proposition to bondholders: SJM is willing to pay US$1,000 for every US$1,000 in principal amount of the notes. These securities were originally issued in January 2021, a period marked by significant capital raising for the group. To facilitate this transaction, Deutsche Bank AG, Singapore Branch has been appointed as the sole dealer manager, with Kroll Issuer Services Ltd acting as the information and tender agent. The company expects to settle the purchases on or around January 16, ensuring a swift resolution before the notes officially mature.
Funded by New Debt
Funding for this repurchase exercise will come from a mix of internal cash resources and the proceeds from a proposed issuance of new U.S. dollar-denominated senior notes. According to the filing, this dual-pronged approach allows the company to retire near-term debt while simultaneously securing fresh capital. Specifics regarding the interest rate and pricing for the new notes are anticipated to be released around January 8. These new instruments will be marketed exclusively to non-U.S. investors, adhering to international regulatory standards.
In a separate statement on Monday, SJM Holdings clarified its intent for the new capital. If the issuance proceeds as planned, the net funds raised will be allocated toward refinancing the group’s existing indebtedness and for general corporate purposes. The board has indicated that this action will provide the group with substantial financial restructuring opportunities. By using longer maturity debt to replace limited obligation debt, this strategy will extend the maturity profile of the group’s liabilities and provide the company with greater access to financial flexibility, an instrumental element in sustaining growth in a capital-intensive gaming industry.
A Heavy Debt Load
SJM Holdings has an extensive amount of debt. On September 30, 2021, SJM Holdings had debt totaling HKD 27.31 billion (US$3.51 billion). In comparison, SJM Holdings had approximately HKD 3.45 billion in cash, bank accounts, and short-term investments. SJM Holdings’ Financial Highlights for the third quarter of FY 2020 provides a clear snapshot of how the company’s operational cash flow contrasts with its high level of leverage within its financial structure.
The SJM portfolio includes some of Macau’s most iconic landmarks: the Grand Lisboa on the peninsula and the Grand Lisboa Palace in the burgeoning Cotai district. Ensuring the financial health of the parent entity is critical to supporting such capital-intensive assets, even as the competitive set in Macau continues to change.
Banking Partners Aligned
To execute this complex refinancing strategy, SJM has assembled a robust consortium of financial institutions. The Deutsche Bank AG Singapore Branch, along with BNP PARIBAS, China International Capital Corporation Hong Kong Securities Ltd, and China CITIC Bank International Ltd, will act in the capacity of joint global coordinators and joint book runners for the new note issuance.
Supporting them is a diverse group of joint lead managers, reflecting strong regional banking ties. Other entities that belong to this group include Banco Comercial Portugues SA Macau Branch, Banco Nacional Ultramarino SA, Bank of China Ltd Macau Branch, and Bank of Communications Co Ltd Macau Branch. Going deeper into participation are CBRE Capital Advisors Inc, China Construction Bank Corp Macau Branch, CLSA Ltd, Industrial and Commercial Bank of China (Macau) Ltd, and Tai Fung Bank Ltd. This diverse group of participants reveals high institutional confidence in SJM’s financial stability as well as its strategic vision to manage its balance sheet in the future.
Source: GGR Asia
