Inside Asian Gaming

October 2009 | INSIDE ASIAN GAMING 7 Cover Story willing to give credit to Wynn for continuing to execute on Encore Macau, as that opens perhaps in the second quarter of 2010. The market likes how he [Steve Wynn] has redeployed capital.” Do you see any role for bonds in terms of raising project capital in Macau? BL : “Let’s put it this way, if the market is telling us vis-à-vis theWynn Hong Kong data point that it is willing to pay a mid-teens multiple of cash flow, then I would raise capital that way [via equities], as opposed to using credit, all day long. “The cost of capital on the debt side for new projects—if it’s even available—is much more expensive than raising capital via equity. We certainly saw however an oversubscription of demand for exchangeable debt—effectively to convert, if you will—for Las Vegas Sands in Macau. “In the US, we’re starting to see project finance for gaming projects come to fruition again. And whether it’s projects in Pennsylvania or Kansas or another regional market, we are starting to see interest from credit providers—not cheap credit—but it’s there nonetheless. “I’m not sure how much demand there will be for new supply in this market vis-à- vis debt financing. I suspect we’ll know in the next 12 months. I suspect [in Macau] Las Vegas Sands will want to restart [Cotai] plots five and six after raising fresh capital early next year and there’s going to be some component of debt associated with that, I guess.” When it comes to Hong Kong IPOs for gaming companies, is there such a thing as first mover advantage, or is it more about underlying company value? BL : “I think it’s more to do with underlying value. That includes operating track record, growth profile, management, capital structure, etc. If it were first mover advantage then Galaxy and SJM would be trading at amuch higher multiple. So I would suspect there will be good demand for a Las Vegas Sands listing out here [in Hong Kong]. The dramatic amount of demand for Wynn was not filled. I don’t know if those people will follow on in the open market or not. Certainly a lot of those folks will have an opportunity with Las Vegas Sands. But it’s a different growth profile, a different cap[ital] structure.” Do you expect to see an additional share allocation being made available to institutions followingWynn’s IPO? “There will be 15% greenshoe, but we won’t know about it for a little while. On the institutional side, Wynn [Hong Kong IPO] was at least 20 times oversubscribed. I know one institutional investor that only got 1.5% of his requested order forWynn, so that greenshoe will be filled.” Do you think Macau gaming companies already listed in Hong Kong will try to take advantage of the local bounce in equities and issue more stock? BL : “I was with Galaxy [Entertainment Group] senior management, and I think with regard to Galaxy the answer is ‘No, not a chance’. “It’s more a function of what happened with their last offering, where Permira [a European private equity firm] bought a stake in the company at a significant premium to where the stock is trading right now. That Bill Lerner