Facing heat in Vegas, casinos bet on Macau deals

By Sui-Lee Wee and Michael Flaherty

HONG KONG (Reuters) - U.S. gaming companies are set to cash in some of their chips in Macau, looking to sell or float assets in the Chinese gambling enclave to prop struggling parent businesses back home in Las Vegas.

The debt-laden U.S. casino operators are betting on a rally in stock prices and signs of recovery in Macau's gaming market to spur interest from investors who have endured a volatile and mostly brutal year in gambling stocks.

Sources say Wynn Resorts (WYNN.O) is getting ready to dust off the initial public offering plans it started last year for its Macau unit in what some say could be a more than $2 billion offering.

Las Vegas Sands (LVS.N) is also preparing an initial public offering of its Macau division, having hired Goldman Sachs (GS.N) to run the offer.

Meanwhile, speculation is building that MGM Mirage (MGM.N), under pressure from U.S. gambling regulators and saddled with about $14 billion in debt, may sell its stake in its Macau joint venture.

Malaysian gaming group Genting (GENT.KL), which recently bought a $100 million stake in MGM and has been eyeing opportunities in Macau, is seen as a potential buyer.

What's fuelling the activity is the U.S. casino operators' aim to monetize Macau assets in order to support struggling operations in Las Vegas, bankers and analysts say.

"What I think is driving the speculation at this moment is the financial distress that a lot of the parent organizations standing behind some of the assets in this market are facing," Adam Rosenberg, the global head of gaming for Goldman Sachs, said at a global gaming conference in Macau last week.

"As they've said, they're considering all alternatives to deal with their operational and financial situations."

The time to act is now, say analysts and bankers, as competition on Macau's Cotai strip is only picking up. City of Dreams, a mega casino resort by Melco Crown (MPEL.O), opened up this month, adding another casino operator to the mix.

After dropping 21 percent in the first three months of the year, Hong Kong's benchmark Hang Seng Index .HSI has risen 62 percent since its low in March, luring potential IPO candidates such as Sands and Wynn back to the market.

"The capital markets are presenting an opportunity," Andrew Zarnett, managing director at Deutsche Bank Securities, said at the same conference. "It's temporarily open, which means there's something to be done."

Share prices for most U.S. gaming companies have bounced strongly from their March lows but are trading at a fraction of a year or two ago.

Raising equity to reduce debt may be the best way for casino firms to avoid breaching their loan covenants, analysts said.

For example, MGM's credit default swaps, which measure the protection for bonds, more than trebled in March from January, signaling how costly it could be for the firm to sell debt then.