Melco Resorts & Entertainment is joining SJM Resorts and MGM China in listing senior notes on Macau’s newly formed bond exchange.
The Macau Financial Asset Exchange — referred to as the MOX — launched late last year. It’s a major component of the Chinese Special Administrative Region (SAR) trying to diversity the local economy and reduce its dependency on its casino resorts.
To distinguish itself from major stock exchanges in Hong Kong and Shanghai, the MOX is focusing on bond services. Melco is the third casino concessionaire in the world’s richest gaming market to announce a MOX listing.
Melco is issuing $1.15 billion in senior notes at 5.375 percent interest, due in 2029. The bonds are being issued by Melco’s subsidiary, Melco Resorts Finance Limited.
Casinos Raising Capital
Melco Resorts’ senior notes follow SJM’s announcement in May that it would offer $200 million worth of bonds on the MOX at 3.9 percent, due in 2026. MGM China, the MGM Resorts casino subsidiary in China, revealed that same month that it is listing $750 million in senior notes, due in 2027 at 4.75 percent. MGM’s offering is a dual listing on the MOX and Hong Kong Stock Exchange.
All six of Macau’s casino license holders are set to see their coveted gaming privileges expire next year during this month. While each is expected to receive fresh tenders, participating in the MOX will certainly be welcomed news among Macau officials and the central government in Beijing.
China President Xi Jinping’s administration was a major supporter of bringing a financial trading market to Macau. The MOX is designed to lure non-gaming businesses to establish a physical office in Macau.
The senior notes also provide Macau residents and local institutions with a solid investment vehicle option that comes with little risk. According to Investopedia, senior notes must be repaid first over other debts in the event of a company filing for bankruptcy or being forced into liquidation.
“That makes senior notes more secure than other bonds,” the financial education website explains. However, “That greater level of safety means investors earn slightly lower interest rates.”
Melco Resorts and its parent organization are adhering to Beijing and local government calls to diversify Macau. Along with its MOX participation, Melco International announced last week that it is investing in a $1.55 billion non-gaming mixed-use development in Zhongshan.
Melco International’s initial investment in the project is nearly $286 million. The complex is expected to feature a theme park, residential and commercial property, entertainment venues, hotels, and public parks.
The Zhongshan development site is roughly 20 miles north of where Melco’s multibillion-dollar casino resorts in Macau are located.