“Future borrowings” in doubt
Melco Crown Entertainment could technically default on a multibillion-dollar loan if it cannot get a mandated minimum of 400 table games at its Studio City resort on Macau’s Cotai Strip.
“We are required to satisfy certain conditions relating to the formal opening of the property by October 1, 2016,” the casino operator told the Nasdaq. “In the event that we are unable to meet these conditions, it may constitute an event of default under the Studio City Project Facility.”
In a separate filing, the company, co-owned by James Packer and Lawrence Ho, said it is highly leverage and may not be able to access “future borrowings” should the need require.
“We have been able to meet our working capital needs, and we believe that our operating cash flow, existing cash balances, funds available under the 2011 Credit Facilities and Studio City Project Facility and additional equity or debt financings will be adequate to satisfy our current and anticipated operating, debt and capital commitments.”
The Motley Fool’s Mike King said the company is taking chances. “Some of the ventures are risky obviously,” he wrote. “Going into the U.S. to compete against incumbent casinos in Las Vegas could be an issue. Taking on too much debt could be another issue.
“I’ve had a look at the figures. Current debt to equity is 55 percent; with $600 million it takes it to 69 percent. They can handle that over the long term. I wouldn’t like to see it go much higher than that,” King wrote.
