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Studio City reshuffles debt; S&P says outlook stable

Studio City Finance, a unit of Studio City International Holdings (SCIHL), said it will offer new senior notes to raise funds to redeem outstanding debt.

In a statement to the U.S. Securities and Exchange Commission, Studio City Finance said the notes are proposed to be guaranteed by all of the company’s existing restricted subsidiaries on a senior basis. SCIHL will not be a guarantor.

The interest rate and other terms will be determined at the time of pricing, the company says, adding that completion of the offering will depend on market conditions and investor demand.

In tandem, Studio City Finance also said it has begun a cash tender offer for its outstanding 8.500 percent senior notes due 2020. This offer is conditional on receipt of the net proceeds from the successful completion of one or more debt financing transactions.

The consideration for each US$1,000 principal amount of existing notes will be US$1,003.50.

Ratings agency Standard & Poor’s on Tuesday said it has affirmed its 'BB-' issuer credit rating on the Macau-based casino operator, Studio City and its 'B+' issue rating on the senior unsecured notes issued by Studio City Finance. The outlook is stable.

S&P notes the company remains highly leveraged even after raising funds through the recent initial public offering of SCIHL.

“Studio City received about $400 million in proceeds from the listing, which

it used to partially redeem its $825 million senior notes maturing 2020 in

December 2018,” S&P said. “We still expect the company will remain highly leveraged, with

a ratio of debt to EBITDA that we estimate at 5.0x-6.0x in 2018 and 7.0x-8.0x

in 2019.”

S&P said the impact from the company’s decision to stop its VIP business on its ratings is limited. The agency notes the decision will have a greater impact on revenue than on EBITDA, given the low margins in the segment.

VIP revenues represent about 40 percent of Studio City's casino revenues, but about 10 percent of EBITDA, it notes.


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