Macau casino operator Galaxy Entertainment Group seems to be taking a lesson from supermarket merchandising—but in reverse.
Galaxy is offering one for the price of two on some of its bonds. If the secret of good comedy is timing, then the secret of good business management is timing an unappetising offer to investors in such a way that it’s hard for them to refuse.
The good timing in this case is a slump in regional high-yield bond prices. As a result, Galaxy is offering its bondholders a maximum of USD180 million in cash to redeem up to USD350 million in debt, according to The South China Morning Post.
Galaxy has a pressing need to put its balance sheet in order as it still reportedly has to fork out HKD7.8 billion to finish Galaxy Mega Resort (aka Galaxy Macau) on Cotai. Recently it announced the opening date for the first phase of the project had been put back from the third quarter of 2009 to 2010.
Macquarie Securities said the buy-back would reduce Galaxy’s annual interest payments by about HKD400 million.
Moody’s Investors Service added it is likely Galaxy will still have to raise additional financing to cover a short fall in cash generation arising from the delay to Galaxy Mega Resort.
Galaxy also has a USD250 million-debt note that matures in December 2010, but the SCMP reports that too will be the subject of a reduced payment offer to creditors.
Galaxy is reportedly offering bondholders 53 cents on the dollar for the Singapore-listed note issued in 2005 and due in December 2010.
