Macau concessionaire Sands China Ltd has entered into a loan agreement that will see its controlling shareholder, Las Vegas Sands Corp, provide an unsecured term loan to the tune of US$1 billion.
The loan, repayable on 11 July 2028, provides Sands China with the option of paying cash interest at 5% per annum for the first two years, or “payment-in-kind interest at 6% per annum by adding the amount of such interest to the then-outstanding principal amount of the Loan, following which only cash interest at 5% per annum will be payable,” the company revealed Monday.
The loan will be pre-payable in whole or in part at any time without penalty.
In a Hong Kong Stock Exchange filing, Sands China said the loan agreement “highlights both LVS and the company’s confidence in the long-term growth potential of Macau, and the availability of the loan further bolsters the company’s balance sheet position and liquidity.”
Provision of the loan comes with Macau’s concessionaires facing a zero-revenue environment with Macau’s casinos shuttered for seven days from 11 to 18 July and border restrictions with mainland China set to remain in place for the foreseeable future.
It also follows a similar arrangement between Wynn Macau Ltd and its US-based parent Wynn Resorts in regard to a US$500 million loan facility.
Morgan Stanley analysts recently suggested the Wynn loan was a sign that Macau’s operators are now having trouble borrowing from banks with the impact of the COVID-19 pandemic now stretching well into its third year.
In a note issued late Monday, JP Morgan said the loan would extend Sands China’s liquidity runway by six months to a total of 15 months (September 2023), even under the zero-revenue assumption of pure cash-burn with no GGR.
“This, in our view, should be more than enough liquidity to weather through this downturn, as we cautiously expect a meaningful easing of travel policy to gradually kick in from end-2022/early-2023,” the investment bank wrote.
