Wynn Macau, ticker 1128, began trading in Hong Kong today in a flat overall market. The initial day gain of 7%, while modest by traditional Hong Kong standards, is sharply with the failure of a series of recent IPOs in the Special Autonomous Region.
This is especially good news for Las Vegas Sands, which plans to raise US$ 2 billion before yearend by listing a portion of its Macau subsidiary in the Hong Kong market.
A poor reception for the Wynn offering would presumably have meant a lower price for LVS. I don’t think would have called off the IPO, however. As reported in an 8-K filing with the Securities and Exchange Commission in the US, on September 4th LVS “prefinanced” US$ 600 million of its IPO proceeds through an unusual convertible arranged through Citicorp International.
1. The bonds, which mature on September 4, 2014, earn interest at the rate of 9% for the first year, 12% for the second and 15% for the final two.
2. They are exchangeable into shares of the LVS Macau listing at 90% of the IPO offering price.
3. They are callable by LVS starting 30 days after the IPO. The holders of any bonds called, however, must be issued warrants that give the holders the right to buy the same number of LVS Macau shares, at the same price, as if they had exchanged the bonds for shares.
4. Holders can put the bonds back to LVS during a specified period in 2012, but lose their right to warrants if they do so.
One notable feature of the bonds is what LVS agreed to pay to get immediate access to money that would presumably otherwise be available in 60 to 90 days through the IPO–effectively US$67 million worth of stock in LVS Macau at the IPO price. Another is that they can’t be called, and the borrowing repaid, until after the IPO.