Macau (MNA) – New Cotai Holdings LLC, a company holding a 23 per cent stake in Studio City International Holdings, the operator of the Studio City integrated resort in Macau, has filed for bankruptcy.
According to Bloomberg, New Cotai reportedly lacks the funds to redeem the balance of previously issued notes amounting to US$856 million (MOP6.91 billion).
With liabilities of between US$500 million and US$1 billion, the company’s subsidiaries, namely, New Cotai Ventures LLC, New Cotai LLC, and New Cotai Capital Corp have also filed for bankruptcy.
In a note on Thursday, brokerage Sanford C. Bernstein said that the bankruptcy of New Cotai Holdings – filed earlier this week – ‘has been expected’ as the minor shareholder ‘has no funds to redeem the notes.’
New Cotai Holdings, which originally held a 40 per cent stake in Studio City, was incorporated in 2006 as a vehicle to invest in Studio City.
Its stakes were reduced to around 24.4 per cent after Melco Resorts and Entertainment, Studio City’s major shareholder, held an initial public offering (IPO) for the latter in October 2018.
Prior to the IPO, Melco owned 60 per cent of Studio City through its subsidiary MCE Cotai. Following the IPO, the company retained majority ownership at 53.2 per cent in Studio City.
About the ‘belief held by some investors that the bankruptcy may precipitate Melco doing a buyout of the stake in Macau Studio City it does not own,’ the brokerage firm stated that ‘a buyout of the Studio City minority shareholders (in whole or in part) is not very likely in the near term.’