MBS returns to loan market

Hong Kong

SINGAPORE casino operator Marina Bay Sands (MBS) has returned to the loan market for a financing of up to S$8 billion, in the biggest test so far of lenders' appetite for the gaming sector in the Lion City.

The subsidiary of US gaming giant Las Vegas Sands has mandated four banks on the financing, comprising S$4 billion of new debt to finance the expansion of its existing integrated resort, as well as an amendment-and-extension of its existing financing.

MBS' first new financing for seven years is also the second-largest syndicated loan from Singapore, and bankers say the borrower will be reaching out to new lenders.

"Marina Bay Sands would have to woo both existing and new lenders to achieve success with this exercise," said a Singapore-based loans banker. "The borrower has not raised such a size before and it is also unprecedented for the market in Singapore."

The last syndicated loan for MBS was back in June 2012, when it closed a S$5.1 billion deal with 28 lenders.

In the past seven years, MBS has successfully amended and extended the loan twice - once in July 2014 when it extended the maturity about 2.2 years to February and August 2020, and again in March last year when it pushed the maturity to September 2023 and March 2024.

On both occasions, MBS revised the repayment schedule leading to a slower amortisation of the original loan and also amended the covenants relating to ratios for debt service coverage, interest coverage and debt-to-Ebitda. About S$4 billion of the original principal remains outstanding.

Both those A&E exercises required the support of existing lenders, whose support will again be crucial for the latest exercise.

"I don't expect a significant number of new lenders joining the deal because the borrower has already combed the market in the past. A bulk of liquidity is likely to come from increased appetite from existing lenders," said another Singapore-based loans banker.

Questions surrounding the extent of liquidity available for the deal are being asked because pricing on the deal and the gaming sector pose hurdle for some lenders.

"We are keen to participate. There's no issue for us to join a casino deal, and take large take-and-hold positions in the sector," said a Singapore-based loans banker at a large Chinese bank.

Others had doubts about the extent of liquidity available for the gaming sector.

"As much as the credit is attractive, there's a known restriction in terms of liquidity from the market towards the casino sector," said the second Singapore-based loans banker.

Many banks, both in Asia and globally, have a policy of not lending to the gaming sector.

Existing lenders may well have to increase their commitments, said another banker whose firm has exposure to MBS.

Rival casino operator Genting has also announced a S$4.5 billion expansion of its Resorts World Sentosa, but has yet to approach banks for financing.

MBS's trump card is its impressive track record, which is expected to encourage lenders to renew or take greater exposure.

For the first quarter ended March 31, the borrower clocked US$423 million in Ebitda.

Although this was nearly 22 per cent lower year-on-year than the US$541 million registered in the first quarter of 2018, this was higher compared to the final three quarters of 2018 and MBS is a significant contributor to the bottom line of both parent Las Vegas Sands and the Singapore economy.

Singapore is second only to Macau in terms of Ebitda contribution for Las Vegas Sands, accounting for 29 per cent of the US parent's US$1.45 billion tally for the first quarter of the year.

Since opening in 2010, Marina Bay Sands has attracted more than 330 million visitors and hosted 3,680 events at the Sands Expo and Convention Centre in 2018, according to the company.

The integrated resort has also demonstrated its ability to win support from lenders in testing times in the past.

Its June 2012 loan closed despite emerging a few months after the eurozone crisis in 2011 that saw some heavyweight global lenders retreat to their home markets.

That loan was a refinancing of a S$5.44 billion multi-tranche facility signed in February 2008, at a time when the global financial crisis was brewing and financial difficulties forced Las Vegas Sands to stop work on another multi-billion dollar project in Macau.

The 2008 loan closed with 34 lenders, of which 21 joined in general syndication. Some of those lenders, such as Lehman Brothers and Royal Bank of Scotland, have either folded or no longer play in Asia. Not surprisingly, the 2012 loan had fewer participants.

Since then, the composition of participants in the Asian loan markets has undergone changes, with banks from within the region demonstrating greater appetite for risk than their global rivals. REUTERS