Melco’s local unit to provide guarantee for $1.3-B casino proj

MANILA, Philippines - The local unit of Macau-based casino giant Melco Crown Entertainment Ltd. is providing a $340-million guarantee for an operating unit in charge of a $1.3-billion integrated casino project.

In a regulatory filing, Melco Crown (Philippines) Resorts Corp. said it signed a loan deal with several subsidiaries of Melco Crown.

“The shareholder loan is intended to be a back-up facility arrangement and it is currently expected that it will only be utilized by the borrower in the unlikely event that the senior notes offering consisting of P15 billion aggregate principal...will not be completed,” Melco Philippines said.

Specifically, lender MCE (Philippines) Investments Ltd. will provide contingency funding to Melco Philippines unit MCE Leisure (Philippines) Corp.

Melco Philippines, MCE Holdings (Philippines) Corp. and MCE Holdings No. 2 (Philippines) Corp. will act as gua-rantors.

Under the agreement, the lender might require the borrower to pledge legally and beneficially held shares “as a condition precedent to the initial utilization of the shareholder loan.”

Last week, Melco Philippines’ subsidiary MCE Leisure priced its $340 million, five percent senior notes that will mature in 2019.

“MCE Leisure intends to use the net proceeds from the offering for capital expenditure, refinancing of debt and general corporate purpose,” the company said.

Nineteen primary institutional lenders joined the private offering, Melco Philippines said, adding that the corporate notes will be issued in January subject to customary closing conditions.

It is the second fundraising program of Melco Philippines this year. In April, the company secured $377 million through a share sale that was more than six times oversubscribed by 140 investors.

The $1.3-billion City of Dreams Manila will start commercial operations in July next year with 365 gaming tables, 1,680 slot machines and 1,680 electronic table games. Previously, the casino planned to offer only 242 gaming tables and 1,450 electronic gaming machines.

Melco Crown is hoping to attract its wide network of Asian high rollers for its first project outside Macau.

The casino owner operates the City of Dreams and Altira Macau casinos. It is also building its third casino, Studio City, that will open in 2015.

City of Dreams Manila is also the first gaming venture of the Sy family, whose holding company SM Investments Corp. is involved in five core businesses – retail, mall operations, property, banking and hotel and leisure.

City of Dreams Manila will be the second casino complex to open at the Philippine Amusement and Gaming Corp.’s (Pagcor) 120-hectare Entertainment City, which is groomed to become the country’s version of the Las Vegas strip. In March, port mogul Enrique Razon opened the $1.2-billion Solaire Resort & Casino.

Pagcor forecasts that gambling revenues in the Philippines will grow from $1.3 billion in 2011 to at least $10 billion by 2017 coming from the operations of the four gaming giants in Entertainment City.