Wynn Resorts is set to gross around USD209 million from a new public share offer.
If ever there was a telling commentary on the varying fortunes of gaming operators in the current challenging conditions, this was it.
Investors appear to be snapping up the Wynn offer, even at USD19 a share. The underwriters of the deal have exercised in full their option to take 1.4 million of them. This is despite the fact the cost per share is a cool 8.3 times higher than the asking price for Las Vegas Sands Corp.’s stock at the beginning of this week.
Net proceeds after fees are likely to clear USD200 million. The company said the cash would be used for unspecified corporate spending and to pay its debt. The latter currently stands at approximately USD4.3 billion—less than a third of what’s owed by its troubled Las Vegas rival MGM MIRAGE, which is weighed down by covenants amounting to more than USD13 billion.
Wynn has some of the same timing risk as its fellow Las Vegas operators, having commissioned new capacity in the form of its Encore-branded properties in Las Vegas and Macau coincidental with a time of market recession.
Analysts in the US pointed out though that in current economic conditions any of the share cash Wynn spends on buying debt should stretch a long way. The company is likely to be able to buy back debt at a discount from investors and commercial lenders, looking to gain liquidity on their balance sheets or for other projects.
Wynn Resorts said in a filing on Tuesday to the US Securities and Exchange Commission it had priced the offer of 9.6 million shares at USD19 per share. That’s 8.3 times the closing price that day of common stock in Wynn’s Las Vegas rival Las Vegas Sands Corp.
Coincidentally the net proceeds from the new Wynn share offer will more than cover the company’s Q4 ’08 loss of USD159.6 million (USD1.49 per share) made on revenue of USD614.3 million.
The day the pricing of Wynn’s new share offer was announced, the company’s stock was trading at USD20, up 35 cents from Monday. During the past year it has traded as high as USD119.74 and as low as USD14.50.
Wynn Resorts granted Deutsche Bank Securities Inc. and Merrill Lynch & Co. (joint book running managers and underwriters for the exercise) the now-exercised option to purchase up to an additional 1,440,000 shares of common stock. The option was also extended to J.P. Morgan Securities Inc., Moelis & Company and Wachovia Capital Markets, LLC, who acted as co-managers and underwriters for the offering.
The offering is expected to close this Friday.
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