Lawrence Ho Loans Studio City $60 Million, Money Will Be Used for Phase 2 Construction

Posted on: July 19, 2020, 12:55h. 

Last updated on: July 20, 2020, 01:02h.

Billionaire Lawrence Ho has purchased $60 million worth of senior notes offered by Studio City — the Macau integrated resort casino — saying the funds will help continue its Phase 2 construction.

Lawrence Ho Studio City Melco Resorts
Lawrence Ho, seen here during his father’s funeral this month, is betting heavily on Macau’s continued success. (Image: Kim Cheung/AP)

Studio City International Holdings Limited (SCIHL) announced earlier this month that the company was looking to raise $1 billion through the offering of senior notes. The capital is needed, as revenue has plummeted during the COVID-19 pandemic, and Studio City is required under Macau law to complete its second phase of construction by May of 2022.

A loan note is an extended form of a generic ‘I Owe You’ document from one party to another,” explains Investopedia.

“A loan note denotes a type of contract that typically outlines the legal obligations of the lender and the borrower,” Investopedia’s article continues. “A proper loan note will include a set of contractual penalties, including the right to sue or seek arbitration if either party to the contract fails to meet or otherwise defaults on financial obligations.”

Ho’s senior notes are due in 2025 and come with an interest rate of six percent. The disclosures were made through filings with the Hong Kong Stock Exchange.

SCIHL is offering $500 million in senior notes at six percent interest due in 2025, and another $500 million at 6.5 percent interest due in 2028.

Ho Bullish on Macau

The global gaming industry has been crippled by the coronavirus, and Macau — the world’s richest gaming hub — continues to reel. Gross gaming revenue (GGR) in the Chinese Special Administrative Region (SAR) totaled just $90 million last month, a 97 percent year-over-year loss.

However, there’s a reason for optimism. GGR is trending higher in the early weeks of July, and the recent easing of mandatory 14-day quarantine for people coming and going between Macau and Guangdong is allowing visitors to more freely return.

Melco Resorts warned investors this month that because of COVID-19, Studio City likely won’t meet the May 2022 deadline to finish the $1.4 billion Phase 2 expansion. But Ho believes the Macau government will be lenient and provide the resort with an extension.

Melco Resorts holds a 54.3 percent stake in Studio City. Along with Ho lending the development $60 million, Melco says it plans to purchase up to half of a billion dollars in new Class A ordinary shares in SCIHL. That will increase the casino company’s position in Studio City.

Melco Ups Macau Stake

Melco Resorts controlled a 21.4 percent market share in Macau during the first quarter of 2020. That’s up from 15 percent in the first quarter of 2019, and up from 17 percent at the end of last year.

Analysts at Bernstein say Melco has increased its share in the VIP and mass markets.

In Macau, Melco fully owns and operates City of Dreams and Altira — both integrated resorts on the Cotai Strip — as well as eight Mocha Clubs.