Casino operator Melco Crown Entertainment (NASDAQ:MPEL) has inked a deal with a consortium of property companies dubbed the “Philippine Parties” to build a $1 billion casino-hotel in the gambling hub of Manila, the second-biggest city in the Philippines.
Belle Corp., a Philippines-based property and leisure company owned by the country’s wealthiest man, Henry Sy, along with PremiumLeisure and Amusement and Melco have agreed to build and operate Belle’s integrated resort complex at Aseana Boulevard in Parañaque City.
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Melco’s wholly-owned subsidiary MPEL Projects will operate the gaming and non-gaming operations as a lessee.
The deal is contingent upon the approval by the Philippine Economic Zone Authority. The Philippine Amusement and Gaming Corp. has issued a provisional license to the consortium and intends to issue a regular casino gaming license upon the satisfaction of certain conditions.
Under the terms of the license, the Philippine Parties will make a $650 million payment to the Philippine Amusement and Gaming Corp. at the start of commercial operations and a total of $1 billion for the entire project.
Melco’s investment is not expected to exceed $580 million in cash and debt. It may use a loan facility of about $320 million in fund the deal.
Hong Kong-based Melco, which has up until now been solely focused on China’s Macau region, said the deal provides it with future expansion opportunities throughout Asia, which is widely regarded as the fastest-growing gaming region in the world.
Melco said expanding into new jurisdictions where it anticipates strong returns on capital will diversify its exposure to Asia and help it deliver “incremental sources of earnings and cash flow.”
The Philippines is a fast-growing tourist destination in Southeast Asia closely located to a range of booming tourism markets, including South Korea, Taiwan, Japan and China. Last year, the Philippines Department of Tourism recorded 3.9 million visiting tourists, led by South Koreans, Americans and the Chinese.
The casino company said its success in Macau will allow it to “take advantage of the anticipated growth in the leisure and tourism industries in the Philippines,” which it forecasts will cater to an “increasingly affluent and growing Asian middle class.”