Biz Buzz: Caesars’ quest
THE GAMING sector may be out of flavor for now but Las Vegas’ Caesars Entertainment isn’t giving up its bid to gain a foothold in the local market.
Representatives from Caesars appeared before the government’s economic cluster in August to present in concrete terms its proposed $1.2-billion Caesars Gateway Resort project, which the group is pitching to be “the first internationally branded integrated resort in the Philippines” and prospectively the group’s “flagship destination in Asia.”
Based on documents submitted to the economic cluster, the project could be located either adjacent to the Ninoy Aquino International Airport (Naia) or on a site by Manila Bay adjacent to Entertainment City. From what we hear, the Naia option has been ruled out by the government but Caesars is still hopeful that the state-owned Philippine Amusement and Gaming Corp. will agree to the issuance of a fifth license to operate at the Manila Bay area.
Caesars has also identified as its partner in building this integrated resort Interior Resource Network Inc. (IRN), an international hotel acquisition and development firm. It noted that IRN was no stranger to the Philippines, having been in this market for 12 years.
IRN has a steel-rolling plant in Bicutan, Parañaque, for a government-approved classroom infrastructure program alongside a furniture facility in Cebu. IRN was also described as a “major exporter of Philippine-produced structural steel.”
For the hotel component of the $1.2-billion integrated resort, Caesars has committed to deliver the following: A 150-suite VIP 6-star hotel with 10 VIP villas; 1,050 rooms of
5-star accommodations, and 800 rooms of 4-star accommodations (for phase 2). It also vowed to create a festive outdoor retail, dining and entertainment district, a convention center to attract the MICE (meeting, incentives, conferencing and exhibition), a 5,000-seater multipurpose performance arena and other entertainment facilities.
If accepted by the Aquino administration, this will be the first internationally branded integrated resort to be approved under this regime as all ongoing projects had been conceived and approved by the previous Malacañang tenant.
Putting this in the context of moolah for the local economy, the documents showed that Caesars expects to create 3,000 jobs during construction, 7,000 jobs from resort operations and 10,000 indirect jobs from operations. Total impact on economic activities is projected by the gaming firm to reach $2 billion by the third year of operation, during which annual taxes to government are estimated at $165 million.
Based on its timeline, Caesars wants to secure a leasing agreement with the land owner this year. It aims to start detailed design, obtain building permits and break ground by February 2016. Doris Dumlao-Abadilla
Debt swap close call
MARKET players had high hopes for the Bureau of the Treasury-managed Philippine government debt swap when it was announced a few weeks ago.
After all, financial markets were liquid and banks needed somewhere to park their funds, while the government needed to save on interest expenses ahead of the expected interest rate increase by the US Federal Reserve.
So with a mandate to accumulate up to P300 billion for the debt swap—basically exchanging old illiquid government bonds for newer, more liquid issues—the Treasury approached the market with the help of its usual gang of private sector underwriters. It was supposed to be a walk in the park.
But lo and behold! As of Friday morning (a few hours before the deadline for banks to commit to the deal), word was circulating that the issue’s underwriters had managed to secure only P25 billion worth of commitments from banks.
This was so bad that there were doubts if it would be able to reach P100 billion in commitments. If this happened, it would represent egg all over the faces of government officials who prided themselves in being one of the most astute debt issuers in the world.
What was the problem?
Apparently, there was a lack of communication between the Treasury and private banks as to what each side really expected of the other.
“Love is a two way street,” said one banker familiar with the deal. “The Treasury thinks they can impose on banks just like that and not listen to the banks’ issues.”
And the top issue banks had with the debt swap was that the Treasury was being unusually tight-fisted with the yields.
“The Treasury was unwilling to meet banks halfway,” said another banker. “The yields were too low, and they basically said ‘you need us more than we need you.’”
Had the Treasury yielded to bankers’ pleas to raise its yield by a mere 25 basis points, the picture would have been very different, the banker pointed out, adding that even a slight increase in rates would have “brought banks running to snap up the issue.”
So, since takers of the debt swap were scant, Treasury officials took to their telephones and called up banks on Friday morning, pleading with them to join the issue, using one of the government’s favorite tools in a situation like this: “Moral suasion.”
The message was clear: “If you don’t help us now, you’ll suffer the consequences later.”
And voila! By mid-afternoon, debt swap commitments had swelled to more than P100 billion.
A few more calls to government financial institutions and one investment bank, which has been a longtime friend of the Treasury, yielded several billions more in commitments. By the end of Friday, orders had breached the P300-billion mark.
“Nilalangaw yan kahapon,” another banker said, describing a scene where flies hover over unwanted food. “But with some arm-twisting, they were able to pull it off.” Impressive.
Of course, all this could have been avoided if National Treasurer Roberto Tan was getting unadulterated feedback from the market, the banker noted. As it stands, signals sent to him from the marketplace were filtered by his own cordon sanitaire of deputies, he added. Tsk tsk. Daxim L. Lucas
Dermalog says …
LAWYERS of German biometrics firm Dermalog Identification Systems wrote Biz Buzz to say that, contrary to what had been written earlier, the company was neither on the brink of bankruptcy in 2012 nor at any other time.
They added that Dermalog’s joint-venture project for the proposed refurbishing of some 82,000 precinct count optical scan (PCOS) machines —Avante Tech—“has a large experience with election equipment.”
More importantly, the company’s lawyers pointed out that Dermalog was neither entirely or in part owned by the the German government, as reported last week in this column.
“The German Bundesdruckerei GmbH is a private law company and has only acquired a minority stake in Dermalog,” they added.
In any case, the Commission on Elections eventually chose to lease new optical mark reader machines from its longtime supplier Smartmatic-Total Information Management (TIM) Corp. to be used for the 2016 elections.
Of course, with billions of pesos on the line, expect this to remain a hot topic in the coming weeks. Daxim L. Lucas
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