Melco to invest $580M in PH casino project

MANILA, Philippines–Macau casino giant Melco Crown Entertainment plans to invest up to $580 million in a Philippine entertainment complex as a strategic partner of tycoon Henry Sy.

The investment makes Melco the single largest investor in the complex being developed by Belle Corp. at the Aseana Business Park in Parañaque City.

In a disclosure in Hong Kong Thursday night, Melco said that its wholly owned subsidiary, MPEL Projects Ltd., had entered into a memorandum of agreement with SM group, Belle and Belle’s subsidiary Premium Leisure and Amusement Inc. (PLAI).

The parties will negotiate and sign within 60 days a consortium agreement for the leasing, development, operation and management of certain parcels of land located in the Philippines, including the further development of the building structure and shell of a grand casino and hotel complex into a “world-class casino, hotel, retail and entertainment complex.”

The execution of the consortium agreement is conditional upon the registration of the project site as a tourism economic zone by the Philippine Economic Zone Authority, Melco said.

British Virgin Islands-based MPEL Projects or an affiliated party will operate the gaming and nongaming operations as lessee, the disclosure said.

MPEL Projects’ total investment over the course of the project was expected to be no more than $580 million, contributed by a combination of cash, cash flow and debt financing. It is expected that a loan facility of about $320 million will be made available to MPEL Projects to bankroll the project, based on the disclosure.

Under the terms of the provisional license, Philippine Amusement and Gaming Corp. (Pagcor) requires the consortium to make a minimum investment of $650 million at the start of commercial operations and a total of $1 billion for the entire project. The proportion of investment to be brought in by Melco thus suggests that there will be a dilution in the economic interest of Belle and its original partner Leisure & Resorts World Corp. (LR), which would otherwise have a 50-50 sharing in cash flow from the project.

Shares of Belle and LR dropped by 4.81 percent and 7.91 percent respectively to P5.14 and P8.50 per share as investors sold on news about the details of the venture. Shares of SM Investments Corp., a leading conglomerate in the country, firmed up by 0.4 percent to P745 per share.

The disclosure also noted that Pagcor had issued a provisional license to the consortium and intends to issue a regular casino gaming license upon satisfaction of certain conditions referred to in the provisional license.

The signing of the agreement happened shortly after last week’s visit to the Philippines by the men behind Melco—Australian billionaire James Packer and Lawrence Ho, son of gaming tycoon Stanley Ho.

Melco noted that the Philippines was a popular tourist destination in Southeast Asia and closely located to a range of important tourism markets, including South Korea, Taiwan, Japan and China.