Galaxy Entertainment Group, which has delayed the opening of a new casino in Macao amid a harsh market for gaming firms, offered to buy back $350 million worth of bonds at a steep discount to their face value.

Macao out-earns the Las Vegas Strip as the world's biggest gaming market, but a flood of new capacity, the global credit crunch and visa rules that make it harder for the mainlanders to visit, have battered operators in the enclave.

"We'd like to reduce our debt, and we'd like to significantly reduce our interest charges given the current economic environment," said Galaxy investor relations official Peter Caveny in a telephone interview.

Buying back the bonds at discounts of between 47 percent and 62.5 percent relieves pressure on Galaxy's cash flow but leaves it short of funding to complete its planned Galaxy Cotai Mega Resort project at a time when investors shun risky projects.

Late last month, Standard & Poor's lowered its long-term credit rating on the firm's Galaxy Casino unit to "B" from "B+", with a negative outlook, citing the delayed opening of the Mega Resort to 2010 from the middle of next year.

Caveny said the company has HK$6 billion in cash and is not committing to a date for the opening.

"We want to align the opening of Cotai to proper market conditions," he said. "Our view is that 2009 is going to be a very difficult year, and we will revisit our capital expenditure programs in Q1 and Q2 and just see how the market is."

The cooling of the Macao boom comes as debt-burdened US operators are groaning under heavy debt, slackening demand, and devastated share prices.

US giant Las Vegas Sands last month halted construction on its Macao expansion and laid off most of its 11,000 construction workers there due to a financing crunch.

Galaxy is offering to pay $530 per $1,000 in face value for floating rate notes worth $250 million due in 2010, offering $375-$450 per $1,000 face value in a modified Dutch auction for up to $100 million in fixed-rate notes due in 2012.

The 2010s traded on Monday at 42 cents on the dollar, Caveny said.

Reuters

(HK Edition 12/03/2008 page2)