Wynn Resorts Selling $900M in Bonds to Redeem Las Vegas Debt

Wynn Resorts (NASDAQ: WYNN) announced today it’s selling $900 million in corporate debt maturing in 2035 in a private offering.

The sale is being driven by the casino operator’s Wynn Resorts Finance, LLC and Wynn Resorts Finance units. Those entities are described as “each an indirect wholly-owned subsidiary of Wynn Resorts.” The offering is aimed at redeeming Wynn Las Vegas debt coming due next year.

At the end of the second quarter, Wynn Resorts has $10.72 billion in outstanding liabilities, of which $3.49 billion was tied to Wynn Resorts Finance with another $877.8 million attributable to Wynn Las Vegas, according to the company’s investor relations website.

Wynn Confirming Access to Capital Markets

The casino industry is a capital-intensive group, meaning access to capital markets is essential. With its latest bond sale, Wynn is confirming it checks that box.

The operator has previously used bond sales to redeem imminent maturities, engaging in what amount to debt-for-debt transactions. Debt-for-debt deals are common in Corporate America for various reasons, including the point that large companies rarely use straight cash to pay off near-term maturities.

By exchanging short-term debt with longer-dated bonds, issuers can keep more cash on hand for growth initiatives while extending their maturity windows and potentially locking in favorable interest rates. Treasury yields are high today, but Fed funds futures imply an almost 70% chance the Federal Reserve will raise interest rates when it meets next week.

Issuing debt in advance of a potential rate hike is smart, particularly for junk-rated issuers such as Wynn because as rates rise, so do issuers’ interest expenses. The casino giant is rated BB- by S&P, the highest non-investment grade. The ratings agency has a “stable” outlook on the gaming company.

Exploring Private Placements

Wynn’s $900 million debt sale is a private offering or private placement, but that doesn’t imply it’s a clandestine affair. Companies frequently engage in private securities sales involving predetermined investors.

In private sales, issuers leverage regulatory exemptions to legally avoid costly and time-consuming registration procedures with the Securities and Exchange Commission (SEC).

Private offering buyers are typically highly sophisticated institutional investors, including endowments, fund managers and pensions, among others.