SJM Holdings raises above $387m through right issue to bid for 10-year licence to operate casinos in Macau. The total of HK$2bn comprises the right issue and the unsecured term loan from parent STDM. This would help the operator of the Grand Lisboa Palace and other casinos to get the minimum capital requirement for as much as $618m. Macau government sets this and plays as a prerequisite to bid the gaming licences. However, other five Macau’s casinos have enough liquidity not needing any equity funding before submitting their bids.
So far, SJM would issue right shares for around 1.42bn-1.46bn. This is on a 1 for 4 basis at HK$2.08 each. It could be around a 33.8% discount to the last close of HK$3.14. The firm attempts to allocate HK$2.7bn of the proceeds to invest in SJM Resorts. This would play as the requirement to increase share capital and the rest of working capital/ The fund would also fund the term loan. ECM bankers argue that the company has the urge to fund the cost as well as the benefit perspective. This is because equity fundraising does not require the fim to repay the money.
The liquidity in SJM could allow nine-months operations for the xero-revenue environment. This is according to a research report from Daiwa Capital Markets as of July 12. Meanwhile, the other five casino operators have between 34 months of liquidity. So far, Wynn Macau and Sands China have gained loans of around $1bn and $500m respectively. The fund is from their parent companies.
On the other hand, SJM won government approval to finish the HK$19bn-equivalent six-year loan to finance the existing borrowing. The backing is from Grand Lisboa Palace resort, to improve financial health.