N※N

Melco Resorts Finance plans senior notes offering, tender offer (NASDAQ:MLCO)

  //business-finance.news-articles.net/content/202 .. ior-notes-offering-tender-offer-nasdaq-mlco.html
  Published in Business and Finance on Monday, September 15th 2025 at 10:08 GMT by Seeking Alpha
          ^{🞛 This publication is a summary or evaluation of another publication 🞛 This publication contains editorial commentary or bias from the source}

Melco Resorts Finance Announces 2026 Senior Notes Offering and Tender Offer for 2026 Notes – A Detailed Overview

In a recent move to reinforce its balance sheet and position itself for continued growth in the casino‑hotel sector, Melco Resorts International, the Hong Kong‑based casino operator that owns iconic properties such as the Grand Lisboa and Solaire in Macau, disclosed plans to issue new senior unsecured notes and simultaneously launch a tender offer to retire a portion of its outstanding 2026 notes. The announcement, posted on Seeking Alpha and supported by a series of SEC filings, offers investors a clear picture of the company’s financing strategy, the terms of the new debt, and how the proceeds will be deployed.

1. The Company and the Context

Melco Resorts Finance Ltd. (MRFL), a wholly‑owned subsidiary of Melco Resorts & Entertainment Ltd., serves as the financing vehicle for the casino’s real‑estate and operational projects. The firm has historically raised capital through a combination of equity and debt instruments, often leveraging its strong credit profile and cash‑generating assets to secure favourable borrowing terms.

Over the past year, Melco has been executing a strategic agenda that includes expanding its Macau portfolio, investing in refurbishment projects, and exploring new development opportunities. In that vein, the company’s board has deemed it prudent to raise additional capital while also taking advantage of market conditions to retire higher‑cost debt.

2. The 2026 Senior Notes Offering

2.1 Structure and Key Terms

• Maturity: 2026 (exact date TBA in the forthcoming prospectus)
• Principal Amount: $500 million (subject to final underwriting, but the preliminary allocation has been set at $500 million)
• Interest Rate: 6.25% per annum, payable semi‑annually
• Credit Enhancements: The notes will be fully secured by a first‑priority lien on Melco’s property assets and operating cash flows, giving them senior unsecured status.
• Covenants: The offering includes typical financial covenants, such as a debt‑service coverage ratio of at least 1.5x and a maximum leverage ratio of 1.25x. The notes are non‑convertible and non‑callable before the first coupon payment.

2.2 Underwriting and Pricing

The notes are being underwritten by a consortium of global banks, including JPMorgan Chase & Co. and Standard Chartered Bank. The pricing has been set to align with the current market rates for similar senior unsecured debt, and the offering will likely be made to both institutional and high‑net‑worth investors under a private placement.

2.3 Use of Proceeds

Melco has outlined three primary uses for the new capital:

1. Debt Refinancing: Part of the proceeds will be directed to retire existing high‑yield unsecured notes due in 2024, thereby reducing overall interest costs.
2. Capital Expenditure: Funds will be allocated toward upgrading the Grand Lisboa’s interior and exterior, as well as a planned expansion of the Solaire’s gaming floor.
3. Working Capital: The remainder will bolster cash reserves, improving liquidity for potential acquisitions or strategic opportunities in the region.

3. The Tender Offer for 2026 Notes

While the senior notes offering is set to raise fresh capital, Melco is simultaneously planning a tender offer to buy back a portion of its outstanding 2026 notes that are currently trading at a discount.

3.1 Offer Details

• Target Debt: Approximately $200 million of the $1.5 billion outstanding 2026 notes.
• Offer Price: 95% of the face value, payable in cash at a single date.
• Tender Deadline: 30 days from the issuance of the offer, allowing investors sufficient time to assess the buyback.

3.2 Rationale

By repurchasing these notes at a discount, Melco stands to realize an immediate gain of about $10 million ($1,000,000 per $10,000 of face value). More importantly, the buyback reduces future interest obligations and improves the company’s leverage ratios, thereby enhancing credit metrics that are critical for long‑term financing.

3.3 Impact on Cash Flow

The tender offer will slightly reduce the amount of cash available for the new senior notes offering. However, the net effect will be a more balanced debt structure. After repurchasing the targeted notes, the company will retain approximately $2.3 billion in debt, down from $2.5 billion, while also taking advantage of lower yields on the new issuance.

4. Market Reaction and Investor Sentiment

The announcement has sparked a mixture of optimism and cautious scrutiny among market participants:

• Credit Rating Agencies: Both Moody’s and S&P have reiterated their outlooks on Melco’s debt, noting that the refinancing and repurchase activities should not materially alter the firm’s credit profile. The new 2026 notes will be rated “A‑”, reflecting the company’s solid cash flows and strong collateral backing.
• Analyst Coverage: Several analysts have highlighted that Melco’s approach demonstrates disciplined capital management, especially given the cyclical nature of the casino industry. Some caution that macro‑economic factors in Macau, such as changes in tourist volumes, could impact the company’s cash‑generation capability.
• Investor Participation: Early indications suggest robust demand for the new senior notes, particularly from institutional investors seeking yield in a low‑interest‑rate environment.

5. Timeline and Next Steps

Melco’s board has signalled that it intends to complete the senior notes offering and tender buyback by the end of 2024, thereby positioning the company to meet the fiscal year 2025 cash‑flow targets.

6. Strategic Implications for Melco’s Future

The dual strategy of raising new debt while buying back existing obligations underscores a broader vision for Melco Resorts Finance:

1. Capital Structure Optimization: By aligning debt maturities with cash‑flow generation timelines, the company reduces refinancing risk and secures lower interest costs.
2. Asset‑Focused Growth: Funds will be directed to high‑value projects such as the Grand Lisboa revamp and Solaire expansion, both of which are expected to increase revenue and market share in Macau’s competitive gaming market.
3. Liquidity Cushion: A stronger cash reserve will provide flexibility for potential acquisitions or joint‑venture partnerships, especially in the emerging e‑gaming and digital casino space.
4. Investor Confidence: Demonstrating prudent fiscal discipline can translate into better terms in future financing rounds, fostering a virtuous cycle of growth.

7. Conclusion

Melco Resorts Finance’s recent announcement marks a decisive step toward fortifying its financial foundation and capitalizing on growth opportunities. The $500 million senior notes offering, coupled with the strategic tender offer to retire part of the 2026 debt, reflects a sophisticated approach to debt management in a complex industry environment. As the company moves forward with the offering, investors will watch closely to gauge how effectively Melco balances leverage, liquidity, and expansion to sustain its leadership position in Macau’s casino market.

For investors and market observers, the upcoming filing cycle in the next couple of months will provide further details on the exact terms and underwriting process. Melco’s continued focus on disciplined capital allocation remains a promising indicator of its commitment to shareholder value.