Studio City expected break-even upon reaching some 35pct of past gross gaming revenue

Studio City Finance Limited, the wholly-owned subsidiary of Studio City International Holdings Limited responsible for operating the integrated resort in Cotai has indicated that it expects to achieve break-even Adjusted EBITDA upon reaching about 30 per cent to 35 per cent of its historical gross gaming revenues run-rate.

In a note to the United States Securities and Exchange Commission, Melco Resorts & Entertainment Limited disclosed some developments in respect of Studio City Finance, detailing the impact the Covid-19 pandemic had in its operations.

Despite the downturn, Studio City’s casino’s combined gross gaming revenues during October and November 2020 said to have were increased by approximately 146 per cent when compared to the previous quarter, in line with the city’s gradually recovering gaming and tourism sector.

Macau’s gross gaming revenue in the fourth quarter of 2020 increased by 347 per cent from US$612 million in the third quarter of 2020, with total visitation from mainland China in November and October increasing by 42.7 per cent and 30.8 per cent, respectively, from approximately 412,000 in September.

According to Studio City Finance, as of November 30, 2020 it held cash and cash equivalents of US$98.6 million, plus HK$233 million under a revolving 2016 credit facility, all of which was available for drawdown.

However, it also held US$1.60 billion in outstanding indebtedness, consisting primarily of the 2019 notes with a principal amount of US$600 million due February 2024, plus US$500 million in 6.0 per cent notes due July 2025 and US$500 million in 6.5 per cent due January 2028.

Recently Studio City proposed another senior note offering to help fund the property’s Phase 2 development, with the notes offering, which is yet to be priced, followed by a cash tender offer for any and all of its outstanding 7.250 per cent senior notes due 2024.

The company had already issued a US$500 million private placement of shares in August 2020 that led to Melco Resorts increase its stake to 54.7 per cent.

Last year Melco announced that it was unlikely the completion of Phase 2 of Studio City’s expansion would meet its deadline for May 31, 2022 due to the impact of the pandemic in the group’s operations.

Upon completion, Studio City will offer approximately 900 additional luxury hotel rooms and suites, one of the world’s largest indoor/outdoor water parks, a Cineplex, fine-dining restaurants and MICE space.