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‘Cornerstone’ investors sought in a bid to resume Resorts World Manila IPO plan

Travellers International Hotel Group has revived plans to raise up to US$500 million with a public offering of shares in its Resort World Manila casino and hotel complex.

Travellers is a 50-50 joint venture between Genting Hong Kong, a subsidiary of the Malaysia-based Genting resort conglomerate, and Alliance Global, a Philippine corporation with extensive holdings in residential and commercial real estate and food and beverage.

According to a report in The Wall Street Journal, Travellers wants to start taking orders from institutional and retail investors early in October and list on the Philippine Stock Exchange by the end of the month. Citing sources involved in the deal, the Journal says bankers have been speaking to potential investors to take up what are known as “cornerstone” stakes in the IPO.

Cornerstone investors buy into an offering before it’s officially launched, usually pledging to hold their shares for a fixed period, reducing the risk of a sell-off after the listing.

Resorts World Manila is the Philippines’ largest and most lucrative casino, and Travellers wants to expand both its gambling and extensive non-gambling offering by adding 1,100 more hotel rooms to the existing 1,500 or so, together with a convention center and other attractions. The expansion, to be completed out over the next three years, is budgeted at US$600 million.

Prior to the opening of RWM, major casinos run independently of the government operator-cum-regulator, the Philippine Amusement and Gaming Corporation, had never succeeded in the Southeast Asian archipelago, with many citing corruption and meddling by PAGCOR and government as reasons for their failure. In light of that history, the US$800 million investment to provide world-class gaming facilities at RWM was a risky one, but it appears Travellers arrived with the right product at, crucially, the right time.

RWM opened strong in 2009 despite the global financial crisis and has sustained an enviable performance since then. Travellers reported a 24% year on year jump in consolidated revenues in the first half of 2013 to PHP19.1 billion (US$432.8 million), with profit up 25% to PHP2.3 billion.

Resorts World Manila

RWM’s success assured would-be developers of integrated resorts in the Philippines that conditions were finally conducive to support big investments. And so the long-awaited Entertainment City development—a 100-hectare swath of government-owned land reclaimed from Manila Bay and located about five miles across town from the airport—is finally taking shape, with the opening of the $1.2 billion Solaire in March, and three others resorts under development or on the drawing board.

One of those projects is Travellers’ US$1.1 billion Resorts World Bayshore, though the company has held off on getting it underway, recently announcing that for the time being it is focused on maximizing returns at RWM and does not expect to complete Resorts World Bayshore earlier than 2017.

Proceeds of Travellers’ planned IPO, first announced in the spring, would provide part of the funding for both the RWM expansion and Resorts World Bayshore. The company originally hoped to raise up to $1 billion, and a July filing with the PSX called for a sale of up to 1.57 billion shares. But Asia’s markets, red-hot in the first half of the year, had cooled by that point—the Philippines’ benchmark PSE Composite Index, which had surged 27% through May, had lost most of those gains over the summer—and Travellers downsized the offering and finally pulled it altogether.

If it is successful this time the listing will be the largest in the Philippines this year, according to the Journal.