SJM Holdings Plans $500M Note Buyback Before New Debt Issue
Macau’s SJM Holdings Ltd is taking significant steps to restructure its debt by initiating a cash tender offer aimed at repurchasing all of its outstanding 4.500% senior notes. The total principal amount of these notes is US$500 million, and they are due to mature on January 27.
SJM Holdings’ Strategic Financial Move
The company’s recent filing with the Hong Kong Stock Exchange disclosed that this buyback is part of a larger refinancing strategy. SJM Holdings intends to effectively manage liabilities of both the parent company and its subsidiaries through this initiative.
SJM Holdings is offering bondholders US$1,000 for every US$1,000 of principal in the notes being repurchased. These senior notes were originally issued in January 2021, during a time when the company was actively raising capital. Deutsche Bank AG, Singapore Branch, has been designated as the sole dealer manager for this buyback, while Kroll Issuer Services Ltd will serve as the information and tender agent.
Funding the Buyback
The company plans to finance this repurchase through a combination of internal cash reserves and funds raised from a forthcoming issuance of new U.S. dollar-denominated senior notes. This dual funding strategy not only allows SJM Holdings to retire short-term debt but also ensures the availability of fresh capital for future operations.
Details regarding the interest rate and terms for the new notes are expected to be released around January 8. Notably, these new securities will be marketed exclusively to non-U.S. investors, adhering to international regulatory requirements.
Goals of the New Capital Issuance
SJM Holdings clarified that the net proceeds from the new debt issuance will be allocated for refinancing existing debts and fulfilling general corporate needs. The board views this approach as a chance for substantial financial restructuring, enabling the company to swap shorter maturity debt for longer-term obligations.
This restructuring aims to extend the maturity profile of SJM’s liabilities, thereby enhancing financial flexibility. In an industry that demands substantial capital investment, such flexibility is essential for sustaining growth.
Current Financial Status
As of September 30, 2021, SJM Holdings faced considerable debt, totaling HKD 27.31 billion (approximately US$3.51 billion). This contrasted with about HKD 3.45 billion in cash and equivalents.
The company operates iconic properties in Macau, including the Grand Lisboa and the Grand Lisboa Palace. Preserving the financial health of its parent entity is crucial for supporting these high-value assets amid a competitive landscape.
Collaborative Efforts for Refinancing
To navigate this complex debt refinancing, SJM has partnered with several financial institutions. Deutsche Bank AG Singapore Branch, BNP PARIBAS, and China International Capital Corporation Hong Kong Securities Ltd are acting as joint global coordinators for the new issuance. The involvement of these reputable banks indicates strong confidence in SJM’s financial strategy.
- Key banking partners include:
- Banco Comercial Portugues SA Macau Branch
- Banco Nacional Ultramarino SA
- Bank of China Ltd Macau Branch
- Bank of Communications Co Ltd Macau Branch
- CBRE Capital Advisors Inc
- China Construction Bank Corp Macau Branch
- CLSA Ltd
- Industrial and Commercial Bank of China (Macau) Ltd
- Tai Fung Bank Ltd
The diverse participation from these banking entities showcases a robust belief in SJM Holdings’ ability to stabilize and strategically manage its balance sheet moving forward.
