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Macau''s first casino project financing closes for Wynn Resorts in Macau.

After 15 months of structuring, Wynn Resorts (Macau) has finally closed its first round of senior funding. The facility is split into a US dollar tranche and a Hong Kong dollar tranche and both are further divided into a project facility and a hotel facility.

There is a term loan is for $382 million and a revolving credit facility for HK$117 million ($15 million). The term loan has a maturity of seven years and carries a price of 350bp over Libor. The facility has a two grace period from signing and then follows an amortization schedule. The average life is 5.35 years.

The Hong Kong dollar tranche has a maturity of three years and also carries a spread of 350bp over Hibor, 100bp more than was earlier reported.

Both facilities have recourse to Wynn Macau, which is 90% owned by Wynn Resorts of the US and 10% by local partner Wong Chi Seng. There is no guarantee on the facility by the parent company and no recourse to Wynn Resorts.

Global coordinating lead arrangers (GCLAs) on the deal are Deutsche Bank and SG. They pulled together an interesting syndicate of 14 other banks attracted to the relatively fat spreads on offer.

Senior lead arrangers taking just over $40 million were Aozora Bank, Banco Nacional Ultramarino, Bank of China (Macau) and Shinsei Bank. Lead arrangers were Korea First Bank with a $35 million take and WestLB with $30 million. Banco Comercial de Macau is an arranger with $25 million. Also on $25 million but as a lead manager is Allied Irish Bank. Other lead managers were Canadian Eastern Finance, which took $15 million, ICBC (Macau), which took nearly $12 million and Banco Espirito Do Oriente which took $10 million.

There were three lenders to the Hong Kong dollar facility: Banco National Ultramarino with HK$47 million; Banco Comercial De Macau with HK$40 million and Banco Delta Asia with HK$30 million.

The deal took a long time to structure as lenders had to get comfortable with the new rules surrounding the gaming sector in Macau. Since the new regulations came out in 2001, three new concessions have been awarded. In the process, the government has had to change its own legislation to accommodate a non-monopoly environment. As a result, the structuring of this loan had to go hand in hand with discussions with the government to make sure that everything dovetailed.

For instance, the lenders and the government had to work out how the concession rights to the license would be assigned to the lenders in the case of a bankruptcy. As the banks are not casinos (well, not with their own money), they would not be entitled to run the casino, so a way had to be found to ensure that the banks could transfer those rights to a qualified operator.

"We needed to perfect the security of those gaming assets under the new legislation," says Paul Smith, Deutsche Bank's co-head of debt products for Asia. "It was quite an exercise. It wasn't just a pure financing but it required a lot of coordination with the government."

Adds SG's head of project finance and advisory, Ashley Wilkins: "We believe the financing is a result of the complementary strengths of the parties involved and the high level of cooperation between Wynn Macau, the GCLAs and the numerous other parties involved in structuring the financing, including the Macau SAR Government"

Pricing for the deal was also an exercise in discovery. According to Smith, there were very few reference benchmarks for this deal and the leads had to use a combination of pricing for Macau risk, as well as recent pricing for Vegas deals. "It was very difficult to gain an accurate benchmark for this deal from just Asia," he says.

Still, the bankers clearly would have enjoyed their due diligence, which in particular would have involved some close scrutiny of the recently opened Sands Resort Macau. Anyone going to Macau in recent months could not fail to notice how popular this casino is with people stacked five deep at the myriad tables in a gaming hall the size of a football field.

"There has been a lot of interest in the Sands and we have been monitoring this," says Smith. "The early signs are that it will be very successful and we are certain that Wynn Macau will be the same. It shows it has a very strong business model."

Wynn Macau will be a hotel, shopping and destination gaming resort on a 16-acre site. With 600 rooms and 100,000 square feet of gambling space, it will be one of the biggest such casino complexes in Asia. The total project cost is expected to be $700 million, with roughly 50% of the cost coming from the shareholders' equity and 50% through this debt facility.

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