Macao casino operator Galaxy Entertainment Group Ltd has set an indicative yield range on its US$500 million, two-part bond, market sources said yesterday.

The deal comprises a seven-year fixed-rate tranche callable in four years and a five-year floating-rate note (FRN) callable in three years.

The indicative yield for the fixed-rate deal was set at around 10 per cent, while that on the FRN was set at a spread of 500 basis points over LIBOR (London Interbank Offered Rate), they said.

Pricing is expected today or tomorrow, one source said.

The offer was more than two times subscribed, another source said, adding that 60 per cent of the interest was from the United States, 35 per cent from Asia and the rest from Europe.

Galaxy Entertainment, formerly K. Wah Construction Materials Ltd, told Reuters in late October that the bond issue would help fund a planned HK$5.8 billion (US$748 million) of capital expenditure.

Group Finance Director William Lo said at the time that the rest of the money would be funded through internal resources, borrowing and future cash flow from business operations.

Standard & Poor's has assigned a B-plus rating to the proposed bond issue, while Moody's Investors Service rates it at B1.

Merrill Lynch and Morgan Stanley are the joint bookrunners.

Shares in Galaxy Entertainment were unchanged at HK$4.025 early yesterday.

Galaxy Entertainment plans to build and operate four new casinos over the next five years, including a flagship Galaxy Cotai Mega Resort that will boast 6,300 hotel rooms and 41,000 square metres of gaming.

Galaxy Entertainment is shifting its focus completely to the booming gambling enclave of Macao, an hour's ferry ride from Hong Kong.

Macao is the only place in China where casinos are legal.

(HK Edition 12/07/2005 page3)