A firm with a minority stake in the operator behind the giant Studio City Macau integrated casino resort has reportedly filed for permission to institute Chapter 11 bankruptcy protections after being unable to come to terms with debts of around $856 million.
New York hearing:
According to a report from GGRAsia, New Cotai Holdings LLC holds a 23% stake in Studio City International Holdings Limited and filed for the fresh start with the United States Bankruptcy Court for the Southern District of New York on Wednesday. The company purportedly revealed that it and a trio of affiliated partners owe up to a combined $1 billion to approximately 20 investors and is due to have its initial appeal considered via a special hearing on May 9.
Prominent patron:
Studio City Int’l has run the Studio City Macau integrated casino resort ever since the $3.2 billion venue opened its doors in the Cotai Strip neighborhood of Macau in 2015. The New Cotai Holdings LLC had originally held a 40% stake in the operator but saw this interest diminish following the November completion of an initial public offering exercise.
The Melco Resorts and Entertainment Limited vehicle of Hong Kong-listed Melco International Development Limited is reportedly the largest shareholder in Studio City International while several affiliates of investments firm, Silver Point Capital LP, are said to hold an aggregated 13% stake.
Unplanned consequences:
GGRAsia cited a report from the Law360 news outlet as detailing that New Cotai and its three partners got into financial trouble after being unable to meet obligations regarding unsecured notes that were set to come due on Wednesday. It purportedly quoted an official company filing as explaining that these difficulties had arisen due to ‘unanticipated declines in the Macau gaming market’, some $300 million in unforeseen construction costs and the unexpected decision from the government of Macau to dish out fewer gaming table licenses.
Future concerns:
The announcement from New Cotai clarified that its financial position had been further endangered after Melco Resorts recently declared that it would be ceasing the Studio City Macau’s VIP gaming operations from January of 2020 and delaying the completion of a planned second-phase for the Hollywood-themed venue by three years to July of 2021.
Potential poach:
Finally, the report cited the Asian branch of global brokerage firm Sanford C Bernstein and Company as predicting that this situation could eventually prompt Melco to buy the minority stake New Cotai holds in Studio City Int’l at a reduced cost. However, it reportedly cautioned that such an exercise ‘is far from certain’ and ‘is not very likely in the near term.’