Casino group Melco Crown raises $200 million via ADS

Melco Crown Entertainment sold $200 million worth of primary American depositary shares (ADS) early yesterday morning. The money raised will be used to speed up the payment for its flagship Macau project City of Dreams.

The base deal comprised 38.8 million ADS, each representing three ordinary shares. There was also a 10% greenshoe, which can be exercised during the next 30 days and would bring the total deal size to $220 million.

The shares were priced at $5.15, a 2.3% discount to Wednesday's closing price. The latest prices are a strong recovery from the 52-week-low of $2.33 a share that Melco touched, but they appear to have already peaked -- in late May the shares were trading as high as $6.30.

The deal was said to be multiple times covered by 140 accounts. Investors were a mix of long-only investors and hedge funds. Most of the demand originated in the US, but Asian investors played an important role in driving the early momentum, ensuring that the deal was already looking attractive by the time markets opened in New York.

Melco is one of six companies that have a concession or sub-concession to operate casinos in Macau. Its main properties are Altira Macau (formerly known as Crown Macau) and the City of Dreams, an integrated entertainment resort that includes a casino, bars and restaurants, as well as a 2,200-room hotel. The first phase of this flagship project opened on June 1.

With the proceeds raised by the placement, Melco intends to accelerate repayment on loans used to build the City of Dreams, to fund growth and expansion, with the remainder to be allocated as working capital. At the end of the second quarter, the company had $660 million in cash, compared to debt of around $1.8 billion. On top of this, it has capital expenditure plans of around $175 million for the third quarter.