THE M3: LVS DEBT SYNDICATION TROUBLES, MGM IPO, DETAILS ON CHEUNG/LVS TIES

The Macau Metro Monitor, March 31st, 2010

CHINA SANDS' IPO BANKERS STUCK WITH VENETIAN DEBT FINANCING Financial Times

Citibank, Goldman Sachs, Barclays Capital, BNP Paribas, and UBS AG are part of a syndicate struggling to offload the $1.75BN financing of Venetian Orient Limited (VOL) they agreed to sell to preserve their relationships with Sands and to land the equity raise mandate. Due to the oversupply of Sands-related loans already available in secondary markets at more attractive yields and the upcoming Galaxy syndicated loans ($1.13BN), banks have even less reason to snap up the debt.

The syndicate underwrote the VOL financing to pay for the stalled construction of parcels five and six of Sands China’s Venetian Macao Casino Resort. In January, they packaged the debt as a project finance loan and began shopping it with a 2015 maturity and margin of Libor +450bps with varying upfront fees of 135bps-225bps implying an all-in yield as high as L+499bps. However, pre-existing loans such as the US$3.9BN Venetian Macao Limited (VML) corporate loan sold in 2007 and the SGC 5.44BN Marina Bay Sands (MBS) loan both have more attractive yields at L+621 bps and SOR + 625bps, respectively.

Aside from economics, VML is the least risky of the three because it is fully operational, followed by MBS, which is scheduled to open phase one in April.  The two pre-existing loans are also issued at the corporate level, which banks prefer to exposure in a Greenfield project financing, according to several of the bankers interviewed for this article.

VOL’s prolonged marketing process is blamed on the mid-February Chinese New Year holidays and bankers taking extended holidays during that time period. VOL’s syndication was initially scheduled to close at the end of February, but has been pushed by one month.  At least five institutions have joined the syndication, and according to bankers, commitments thus far are in line with expectations.

MGM HIRES BANKS FOR IPO Macaubusiness.com
MGM Mirage has hired five banks--BNP Paribas, Bank of Ameirca/Merrill Lynch, HSBC, JP Morgan and Morgan Stanley--for its HK listing of its Macau operations, scheduled for the second half of this year. The deal is expected to raise about US$500 million (MOP4billion), according to sources with direct knowledge of the deal.

SPECIAL REPORT: HIGH-ROLLERS, TRIADS AND A LAS VEGAS GIANT Reuters

According to previously undisclosed court transcripts from a trial late last autumn, Cheung Chi-tai was a leader of the Wo Hop To--one of the organized crime groups in the region known as triads. A regular casino patron testifying in the murder-for-hire trial case said that Cheung was  "the person in charge" of one of the VIP rooms at the Sands Macau. Documents show that his investment allowed him a share in the profits from a VIP gambling room at the casino.

Cheung Chi-tai's ties to Sands Macau came through such a multi-tiered arrangement. His solely owned company, Jumbo Boom Holdings, provided capital for another firm, now called Neptune Group, to acquire a stake in Hou Wan, a junket operator. Hou Wan was entitled to profits from Sands Macau's Chengdu VIP room. Cheung owned more than 8% of Neptune Group in 2008, according to public filings with the Hong Kong stock exchange. That made him a substantial shareholder when the call for the dealer's murder went out.

However, Nicholas Niglio, Neptune's COO, said Neptune wasn't a junket itself but invests in VIP junkets that operate at the Sands Macau, the Venetian Macau and Galaxy Entertainment's StarWorld casinos. He said Neptune now had a 20% stake in Hou Wan, a junket operator that runs around 20 VIP tables at the Sands Macau.  A gaming official, who insisted upon anonymity, said: "This relationship (with Cheung) would be of concern to Nevada authorities. You're talking about direct ties to bad guys."

The involvement of the triads in Macau's casinos is centered on the murky and highly profitable junket business. The VIP sector brought in $9.9BN last year, two-thirds of the enclave's total gambling revenues. Macau has about 187 licensed junket operators, said Manuel Joaquim das Neves, director of Macau's Gaming Inspection and Coordination Bureau.  Asked specifically about whether Macau will strip the license from a casino operator if the regulators discover that it is hiring a junket operator with links to organized crime, Neves said: "It's separate. In principle, it doesn't affect the concessionaires."

Ko-lin Chin, a professor at Rutgers University and one of the foremost experts on Asian organized crime, says that even if crime groups are involved in the junket business, with the casinos making so much money, the government reaping huge taxes, and the citizens of Macau enjoying full employment, there is scant political will to remove them. "No one wants to crash the party," he said. "This is a feel-good story."