Hong Kong IPO for Wynn

Wall Street analysts on Tuesday said an initial public offering by Wynn Resorts Ltd. on the Hong Kong Stock Exchange, backed by shares of its Macau hotel-casino, could have an upside for the Las Vegas-based gaming company.

"Wynn has been very opportunistic over the years in taking advantage of favorable market conditions to issue equity and/or debt," Susquehanna Financial Group gaming analyst Robert LaFleur told investors. "Clearly, the Hong Kong stock market is hot and the IPO window is apparently open."

Reports surfaced late Monday that Wynn is planning to publicly list shares of Wynn Macau in Hong Kong in order to raise between $1 billion and $2 billion. According to various wire services, the IPO could take place in the fourth quarter.

On Tuesday morning, Wynn Resorts filed a one-paragraph statement with the Securities and Exchange Commission, saying one of its subsidiaries filed an application for an IPO with the Hong Kong Stock Exchange.

However, the filing said, "No decisions have yet been made regarding the timing or terms of any such offering or whether the subsidiary will ultimately proceed with such a transaction."

According to Macau gaming regulators, Wynn Macau is one of the Chinese gaming enclave's busiest casinos. The resort is undergoing a $700 million expansion to add Encore at Wynn Macau, an all-suite hotel that is expected to open next year.

The news comes as rival casino operator Las Vegas Sands Corp. is also planning an IPO on the Hong Kong Stock Exchange, backed by shares in its Macau holdings, in order to raise upward of $3 billion. Las Vegas Sands President Michael Leven said this month the company was looking at selling a minority stake in its Macau business.

On Monday, news leaked that Las Vegas Sands would apply for the IPO next month and the company's shares jumped almost 15 percent on the New York Stock Exchange.

Analysts said the companies' reasons for offering stock are based on different needs.

Las Vegas Sands wants to resume construction of projects on the Cotai Strip region of Macau that the company halted in November. Also, Las Vegas Sands could be in violation of its bond covenants and may need cash to shore up its balance sheet.

LaFleur said Las Vegas Sands is reportedly in discussions with its lenders on potential waivers.

Wynn, meanwhile, doesn't have those worries. The company reportedly has the funds necessary to finish Encore Macau.

"Wynn is in the best shape among the large Las Vegas gaming operators from a balance sheet perspective, and doesn't need funding to finish any current projects," LaFleur said.

Union Gaming Group principal Bill Lerner agreed. He told investors that Wynn's Macau holdings, once Encore is completed, could be worth roughly $2.8 billion.

"Wynn's balance sheet is in excellent shape and it doesn't need to raise additional capital in order to finish Encore Macau or to address debt maturities over the next several years," he said. "Wynn went 'covenant light' in the U.S. and now has a waiver on its debt covenants until June 2011."

Shares of Wynn Resorts closed at $39.77 Tuesday on the Nasdaq National Market, down 6 cents, or 0.15 percent. Las Vegas Sands shares closed at $9.74, down 12 cents, or 1.22 percent.

The share prices of both Wynn and Las Vegas Sands have taken a beating over the past 18 months. Las Vegas Sands has been given a boost recently, mainly due to Macau, where the company operates the Sands Macau, Venetian Macau and Four Seasons Macau.

Interest in the company was helped by comments this month from rival casino operator Lawrence Ho, who operates Melco PBL. Ho suggested that Las Vegas Sands had reached a deal to cap commissions paid to junket representatives that bring in high-end players.

Restrictions on travel from mainland China into Macau continues to hamper visitor numbers. Gaming revenues declined 12 percent in the 2009 second quarter, according to the Macau's Gaming Inspection and Coordination Bureau.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.