Wynn Resorts Upsizes Bond Tender Offer

Posted on: August 24, 2023, 03:21h. 

Last updated on: August 25, 2023, 10:03h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Wynn Resorts (NASDAQ: WYNN) has boosted the size of a recently announced tender offer for a portion of its senior notes maturing in 2025.

Wynn debt
Wynn and Encore Las Vegas. The operator increased the size of a debt tender offer. (Image: Vegas Means Business)

Earlier this month, the casino operator said it would repurchase $300 million worth of that debt, which bears a coupon of 5.5%. That amount has been increased to $400 million. That issue has an aggregate principal amount outstanding of $1.78 billion.

Since the aggregate principal amount of the Notes validly tendered and not validly withdrawn at or prior to the Early Tender Date exceeds the Tender Cap (as amended), Notes tendered after the Early Tender Date will not be accepted for purchase and the principal amount of the Notes accepted for purchase were prorated, on the terms and subject to the conditions of the Tender Offer, to the Tender Cap (as amended),” according to a statement issued by the Las Vegas-based gaming company.

At the end of the second quarter, Wynn had $12.14 billion in outstanding debt and cash and cash equivalents of $3.65 billion.

Why Wynn is Doing Tender Offer

Wynn commenced the tender offer for a portion of the notes maturing in 2025 because it eliminates a portion of the operator’s high-yield debt obligations. In turn, the company saves on interest expenses and simplifies its capital structure.

That’s important, because Wynn is rated “B+” by Standard & Poor’s (S&P), which puts it well into junk territory. In an environment where interest rates are high and the appetite for junk bonds courtesy of already heavily indebted issuers may be limited, tendering outstanding debt could benefit Wynn.

In May, S&P revised its outlook on Wynn’s credit rating to “positive” from “negative,” citing the rebound in Macau, which is the operator’s largest market.

“As a result of improved cash flow in Macau, we now expect Wynn’s leverage to improve to the high-5x area in 2023, about a year earlier than we expected, compared with mid-7x previously,” noted the ratings agency. “Wynn’s leverage could improve closer to 5x in 2024. We believe this could represent an adequate cushion relative to our 6x upgrade threshold to support a one-notch higher rating and provide the company flexibility to pursue additional large-scale development projects, including expected investments in Macau, the United Arab Emirates, and possibly New York.”

Wynn Taking Other Steps to Conserve Cash

By eliminating a portion of the notes coming due in 2025, Wynn reduces its interest expense obligations, which is undoubtedly a positive for the operator’s balance sheet.

Its cost-saving efforts don’t end there. Earlier this month, the company announced that it is halting WynnBET operations in eight states and putting under review that business in Michigan and New York. The operator didn’t disclose how much it will save via that move.

Wynn will continue to offer sports wagering in the states where it operates land-based casinos, Massachusetts and Nevada.