F-4 1 d25766df4.htm FORM F-4 FORM F-4
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As filed with the Securities and Exchange Commission on October 16, 2020.

Registration No. 333-                

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM F-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Sands China Ltd.

(Exact name of registration as specified in its charter)

 

 

 

Cayman Islands   7011   98-0632755
(State or Other Jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial
Classification Number)
  (I.R.S. Employer
Identification No.)

The Venetian Macao Resort Hotel, L2 Executive Offices

Estrada da Baía de N. Senhora da Esperança, s/n

Macao

Telephone: +853 8118-2888

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Corporation Service Company

1180 Avenue of the Americas, Suite 210

New York, New York 10036

(800) 927-9801

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

Dylan James Williams, Company Secretary

Sands China Ltd.

The Venetian Macao Resort Hotel, Legal Department, L2 Executive Offices

Estrada da Baía de N. Senhora da Esperança, s/n

Macao

Telephone: +853 8118-2888

Facsimile: +853 2888-3382

David J. Goldschmidt

Skadden, Arps, Slate, Meagher & Flom LLP

One Manhattan West

New York, New York 10001

Telephone: (212) 735-3000

Facsimile: (212) 735-2000

 

 

Approximate date of commencement of proposed sale of the securities to the public:

As soon as practicable after the effective date of this Registration Statement and the satisfaction or waiver of all other conditions to the exchange offer

described in the accompanying prospectus.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company  ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of
Securities to be Registered
  Amount to be
Registered(1)
  Proposed Maximum
Offering Price Per Note(2)
  Proposed Maximum
Aggregate Offering Price(2)
 

Amount of

Registration Fee(3)

3.800% Senior Notes due 2026

  US$800,000,000   100.00%   US$800,000,000   US$87,280

4.375% Senior Notes due 2030

  US$700,000,000   100.00%   US$700,000,000   US$76,370

Total

      US$1,500,000,000(4)   US$163,650

 

 

(1)

Represents the aggregate principal amount of each series of notes to be offered in the exchange offer to which the registration statement relates.

(2)

The notes being registered are offered in exchange for all of our currently outstanding 3.800% Senior Notes due 2026 and all of our currently outstanding 4.375% Senior Notes due 2030, previously sold in a transaction exempt from registration under the Securities Act.

(3)

The registration fee has been computed in accordance with Rule 457(o) under the Securities Act of 1933, as amended.

(4)

Represents the proposed maximum aggregate offering price of all notes to be offered in the exchange offer to which the registration statement relates.

 

 

 


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The information in this preliminary prospectus is not complete and may be changed. We may not complete the exchange offer and issue these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED                 , 2020

PROSPECTUS

 

LOGO

(Incorporated in the Cayman Islands with limited liability)

(HKSE Stock Code : 1928)

Offer to Exchange All Outstanding

US$800,000,000 3.800% Senior Notes due 2026

US$700,000,000 4.375% Senior Notes due 2030

For an Equal Principal Amount of

3.800% Senior Notes due 2026

4.375% Senior Notes due 2030

Which Have Been Registered Under the Securities Act of 1933

Sands China Ltd. (the “Company,” “our,” “we,” “us,” or “Sands China”) is offering to exchange new 3.800% Senior Notes due 2026 (the “2026 Notes”) and new 4.375% Senior Notes due 2030 (the “2030 Notes” and, together with the 2026 Notes, the “Notes”) for all of our currently outstanding 3.800% Senior Notes due 2026 (the “Outstanding 2026 Notes”) and all of our currently outstanding 4.375% Senior Notes due 2030 (the “Outstanding 2030 Notes” and, together with the Outstanding 2026 Notes, the “Outstanding Notes”), respectively, on the terms and subject to the conditions detailed in this prospectus and the accompanying letter of transmittal (the “exchange offer”).

The Exchange Offer

 

   

The exchange offer expires at 5:00 p.m., New York City time, on                 , 2021, unless extended by us in our sole discretion (such time and date, as it may be extended, the “expiration date”).

 

   

All Outstanding Notes that are validly tendered and not validly withdrawn will be exchanged.

 

   

You may withdraw tenders of Outstanding Notes at any time prior to the expiration of the exchange offer.

 

   

To exchange your Outstanding Notes, you are required to make the representations described under “The Exchange Offer—Purpose and Effect of the Exchange Offer,” “The Exchange Offer—Procedures for Tendering” and “Plan of Distribution” to us.

 

   

If you are eligible to participate in the exchange offer and do not tender your Outstanding Notes, your Outstanding Notes will continue to accrue interest, but you will not have further exchange or registration rights and will continue to hold Outstanding Notes subject to restrictions on transfer.

 

   

The exchange of Outstanding Notes for Notes in the exchange offer will not be a taxable transaction for United States federal income tax or Cayman Islands law purposes. You should see the discussion under the caption “Taxation” for more information.

 

   

We will not receive any proceeds from the exchange offer.

 

   

You should read the section called “The Exchange Offer” for further information on how to exchange your Outstanding Notes for Notes.

The Notes

 

   

The Notes are being offered in order to satisfy our obligations under the registration rights agreement (the “registration rights agreement”) entered into in connection with the private offering of the Outstanding Notes.

 

   

The terms of the Notes to be issued are identical in all material respects to the Outstanding Notes, except that the Notes have been registered under the Securities Act of 1933, as amended (the “Securities Act”), and will not have any of the transfer restrictions, any of the registration rights provisions and certain inapplicable interest provisions relating to the Outstanding Notes. The Notes will represent the same debt as the Outstanding Notes exchanged therefor and will be issued under the same indenture, as amended or supplemented (the “Indenture”).

 

   

The Notes will be senior unsecured obligations of the Company and will rank equally in right of payment with all of its existing and future senior unsecured debt and will rank senior in right of payment to all of the Company’s future subordinated debt, if any. The Notes will be effectively subordinated in right of payment to all of the Company’s future secured debt (to the extent of the value of the collateral securing such debt), and will be structurally subordinated to all of the liabilities of the Company’s subsidiaries. None of the Company’s subsidiaries will guarantee the Notes.

Resales and Listing of Notes

 

   

The Notes may be sold in the over-the-counter market, in negotiated transactions or through a combination of such methods.

 

   

The Outstanding Notes are listed on The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) by way of debt issues to professional investors (as defined in Chapter 37 of The Rules Governing the Listing of Securities on the Hong Kong Stock Exchange and in the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (together, “Professional Investors”)) only. We cannot assure you that we will be able to maintain a listing of the Outstanding Notes on the Hong Kong Stock Exchange.

 

   

Application will be made to the Hong Kong Stock Exchange for the listing of the Notes by way of debt issues to Professional Investors only. We cannot assure you that we will obtain or be able to maintain a listing of the Notes on the Hong Kong Stock Exchange. This document is for distribution to Professional Investors only.

 

   

Notice to Hong Kong investors: The Company confirms that the Notes are intended for purchase and/or acquisition by Professional Investors only and (if the application for listing is successful) will be listed on the Hong Kong Stock Exchange on that basis. Accordingly, the Company confirms that the Notes are not appropriate as an investment for retail investors in Hong Kong. Investors should carefully consider the risks involved.

The Hong Kong Stock Exchange has not reviewed the contents of this document, other than to ensure that the prescribed form disclaimer and responsibility statements, and a statement limiting distribution of this document to Professional Investors only have been reproduced in this document. Listing of the Notes on the Hong Kong Stock Exchange is not to be taken as an indication of the commercial merits or credit quality of the Notes or the Company or quality of disclosure in this document. Hong Kong Exchanges and Clearing Limited and the Hong Kong Stock Exchange take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.

If you are a broker-dealer and you receive Notes for your own account, you must acknowledge that you will deliver a prospectus in connection with any resale of such Notes. By making such acknowledgment, you will not be deemed to admit that you are an underwriter under the Securities Act. Broker-dealers may use this prospectus in connection with any resale of Notes received in exchange for Outstanding Notes where such Outstanding Notes were acquired by the broker-dealer as a result of market-making activities or trading activities. We have agreed that, for a period of 180 days after the date of this prospectus, we will make this prospectus, as amended or supplemented, available to such broker-dealer for use in connection with any such resale and will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. A broker-dealer may not participate in the exchange offer with respect to Outstanding Notes acquired other than as a result of market-making activities or trading activities. See “Plan of Distribution.”

If you are an affiliate of ours or are engaged in, or intend to engage in, or have an agreement or understanding to participate in, a distribution of the Notes, you cannot rely on the applicable interpretations of the Securities and Exchange Commission (the “SEC”), and you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, and you must be identified as an underwriter in the prospectus.

You should consider carefully the risk factors beginning on page 19 of this prospectus before participating in the exchange offer.

Neither the SEC nor any state securities commission has approved or disapproved of the Notes or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

                , 2021


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Notice to Persons in Hong Kong

You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. The Notes are only offered in Hong Kong or to persons in Hong Kong who are (a) “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and (b) acquiring the Notes in circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. Each such acquirer of the Notes, by accepting delivery of this prospectus and/or the accompanying document(s), will be deemed to have represented, agreed and acknowledged that (a) it is a “professional investor” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong; and (b) it is acquiring the Notes in circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance.

Prohibition of Sales to EEA and UK Retail Investors

The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”) or in the United Kingdom (“UK”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); or (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended, the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (as amended, the “Prospectus Regulation”). Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the Notes or otherwise making them available to retail investors in the EEA or in the UK has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA or in the UK may be unlawful under the PRIIPS Regulation.


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TABLE OF CONTENTS

 

     Page  

Summary

     1  

Risk Factors

     19  

Use of Proceeds

     38  

Capitalization

     39  

Selected Financial Information

     40  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     43  

Business

     74  

Regulation

     89  

Board of Directors and Senior Management

     93  

Related Party Transactions

     98  

The Exchange Offer

     100  

Description of Notes

     110  

Description of Other Material Indebtedness

     142  

Taxation

     145  

Plan of Distribution

     147  

Legal Matters

     151  

Experts

     152  

Where You Can Find More Information

     153  

General Information

     154  

Index to Consolidated Financial Statements

     F-1  

 

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NOTICE TO INVESTORS

This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any Notes offered hereby in any jurisdiction where, or to any person to whom, it is unlawful to make such offer or solicitation. We have not authorized the provision of information different from that contained in this prospectus, to give any information or to make any representation not contained in or not consistent with this prospectus or any other information supplied in connection with the offering of the Notes. The information contained in this prospectus is accurate in all material respects only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the Notes. Neither the delivery of this prospectus nor any sale made hereunder shall under any circumstances imply that there has not been a change in our affairs and those of each of our respective subsidiaries or that the information set forth herein is correct in all material respects as of any date subsequent to the date hereof.

This prospectus includes particulars given in compliance with the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange for the purpose of giving information with regard to the Company. The Company accepts full responsibility for the accuracy of the information contained in this document and confirms, having made all reasonable inquiries, that to the best of its knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

We have prepared this prospectus, and we are solely responsible for its contents. You are responsible for making your own examination of us and your own assessment of the merits and risks of investing in the Notes.

The distribution of this prospectus and the offering of the Notes may in certain jurisdictions be restricted by law. Persons in possession of this prospectus are required by us to inform themselves about and to observe any such restrictions. For a description of the restrictions on offers, sales and resales of the Notes and distribution of this prospectus, see the section headed “Plan of Distribution” below.

This prospectus summarizes certain material documents and other information, and we refer you to them for a more complete understanding of what we discuss in this prospectus. In making an investment decision, you must rely on your own examination of us and the terms of the offering, including the merits and risks involved. We are not making any representation to you regarding the legality of an investment in the Notes by you under any legal, investment or similar laws or regulations. You should not consider any information in this prospectus to be legal, business or tax advice. You should consult your own attorney, business adviser and tax adviser for legal, business and tax advice regarding an investment in the Notes.

Under the Cayman Islands Data Protection Law, 2017 and, in respect of EU data subjects, the EU General Data Protection Regulation (together, the “Data Protection Legislation”), individual data subjects have rights and the Company as data controller has obligations with respect to the processing of personal data by the Company and its affiliates and delegates. Breach of the Data Protection Legislation by the Company could lead to enforcement action.

Prospective investors should note that personal data may in certain circumstances be required to be supplied to the Company in order for an investment in the Notes to continue or to enable the Notes to be redeemed. If the required personal data is not provided, a prospective investor will not be able to continue to invest in the Notes or to redeem the Notes.

The Company has published a privacy notice (the “Data Privacy Notice”), which provides prospective investors with information on the Company’s use of their personal data in accordance with the Data Protection Legislation. The Data Privacy Notice is available for inspection at Level 30, Infinitus Plaza, 199 Des Voeux Road Central, Hong Kong.

 

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See “Where You Can Find More Information” for instructions on how to obtain copies of all or any part of the registration statement of which this prospectus forms a part without charge upon written or oral request. To obtain timely delivery of these documents, you must request them no later than five business days before the expiration date. This means that if you wish to request documents, you must do so by                , 2021, in order to receive them before the expiration date.

WARNING

You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice.

 

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PRESENTATION OF FINANCIAL INFORMATION

Our financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board, which differ in certain respects from generally accepted accounting principles in the United States (“US GAAP”) and in certain other countries. We have made no attempt to describe or quantify the impact of those differences. In making an investment decision, investors must rely upon their own examination of us, the terms of the Notes and the financial information we present herein. Potential investors should consult their own professional advisers for an understanding of the differences between IFRS and accounting principles generally accepted in other countries, including the United States, and how those differences might affect the financial information presented herein.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in the financial statements.

This prospectus contains non-IFRS financial measures and ratios that are not required by, or presented in accordance with, IFRS, including Adjusted Property EBITDA. We present non-IFRS financial measures so that investors have the same financial data that management uses in evaluating financial performance with the belief that it will assist the investment community in assessing the underlying financial performance of the Company on a year-over-year and a quarter sequential basis. The non-IFRS financial measures may not be comparable to other similarly titled measures of other companies, since they are not uniformly defined, and have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results reported under IFRS. Non-IFRS financial measures and ratios are not measurements of our performance under IFRS and should not be considered as alternatives to operating income or net profit or any other performance measures derived in accordance with IFRS or any other generally accepted accounting principles.

 

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FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that are, by their nature, subject to significant risks and uncertainties. These forward-looking statements include the discussions of our business strategies and expectations concerning future operations, margins, profitability, liquidity and capital resources. Any statements contained in this prospectus that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, in certain portions included in this prospectus, the words “anticipates,” “believes,” “estimates,” “seeks,” “expects,” “plans,” “intends” and similar expressions, as they relate to our Company or management, are intended to identify forward-looking statements. Although we believe that these forward-looking statements are reasonable, we cannot assure you that any forward-looking statements will prove to be correct. These forward-looking statements involve known and unknown risks, uncertainties and other factors beyond our control, which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among others, the risks associated with:

 

   

the uncertainty of the extent, duration and effects of the COVID-19 Pandemic (as defined in the “Glossary” section of this prospectus) and the response of governments, including government-mandated property closures, increased operational regulatory requirements or travel restrictions, and other third parties on our business, results of operations, cash flows, liquidity and development prospects;

 

   

general economic and business conditions, which may impact levels of disposable income, consumer spending, group meeting business, pricing of hotel rooms and retail and mall tenant sales;

 

   

disruptions or reductions in travel, as well as disruptions in our operations, due to natural or man-made disasters, pandemics, epidemics or outbreaks of infectious or contagious diseases, political instability, civil unrest, terrorist activity or war;

 

   

the uncertainty of consumer behavior related to discretionary spending and vacationing at our integrated resorts;

 

   

the extensive regulations to which we are subject and the costs of compliance or failure to comply with such regulations;

 

   

our ability to maintain our gaming license and subconcession in Macao;

 

   

new developments, construction projects and ventures, including our Cotai initiatives;

 

   

fluctuations in currency exchange rates and interest rates;

 

   

regulatory policies in mainland China or other countries in which our customers reside, or where we have operations, including visa restrictions limiting the number of visits or the length of stay for visitors from mainland China to Macao, restrictions on foreign currency exchange or importation of currency, and the judicial enforcement of gaming debts;

 

   

our leverage, debt service and debt covenant compliance, and ability to refinance our debt obligations as they come due or to obtain sufficient funding for our planned, or any future, development projects;

 

   

increased competition for labor and materials due to planned construction projects and quota limits on the hiring of foreign workers;

 

   

our ability to obtain required visas and work permits for management and employees from outside countries to work in Macao, and our ability to compete for the managers and employees with the skills required to perform the services we offer at our properties;

 

   

our dependence upon properties in Macao for all of our cash flow;

 

   

the passage of new legislation and receipt of governmental approvals for our operations;

 

   

our insurance coverage, including the risk that we have not obtained sufficient coverage, may not be able to obtain sufficient coverage in the future, or will only be able to obtain additional coverage at significantly increased rates;

 

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our ability to collect gaming receivables from our credit players;

 

   

our relationship with gaming promoters;

 

   

our dependence on chance and theoretical win rates;

 

   

fraud and cheating;

 

   

our ability to establish and protect our intellectual property rights;

 

   

conflicts of interest that arise because certain of our directors and officers are also directors of LVS;

 

   

government regulation of the casino industry (as well as new laws and regulations and changes to existing laws and regulations), including gaming license regulation, the requirement for certain beneficial owners of our securities to be found suitable by gaming authorities, the legalization of gaming in other jurisdictions and regulation of gaming on the Internet;

 

   

increased competition, including recent and upcoming increases in hotel rooms, meeting and convention space, retail space, potential additional gaming licenses and online gaming;

 

   

the popularity of Macao as a convention and trade show destination;

 

   

new taxes, changes to existing tax rates or proposed changes in tax legislation;

 

   

the continued services of our key management and personnel;

 

   

the ability of our subsidiaries to make distribution payments to us;

 

   

labor actions and other labor problems;

 

   

our failure to maintain the integrity of information systems that contain legally protected information about people and company data, including against past or future cybersecurity attacks, and any litigation or disruption to our operations resulting from such loss of data integrity;

 

   

the completion of infrastructure projects;

 

   

the outcome of any ongoing and future litigation; and

 

   

other factors described under “Risk Factors.”

All future written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. Readers are cautioned not to place undue reliance on these forward-looking statements. We assume no obligation to update any forward-looking statements after the date of this prospectus, as a result of new information, future events or developments, except as required by federal securities laws.

All forward-looking statements contained in this prospectus are qualified by reference to this cautionary statement.

 

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ENFORCEMENT OF CIVIL LIABILITIES

We are incorporated in the Cayman Islands as an exempted company with limited liability. Some of our directors and officers and the experts named herein reside outside the United States (principally in Hong Kong and Macao). All or a substantial portion of our assets and such persons’ assets are located outside the United States (principally in Macao). As a result, it may not be possible for investors to effect service of process within the United States upon us or such persons, or to enforce against us or such persons judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the federal securities laws of the United States.

We have appointed Corporation Service Company, located at 1180 Avenue of the Americas, Suite 210, New York, New York 10036 as our agent to receive service of process with respect to any action brought against us in the United States District Court for the Southern District of New York under the federal securities laws of the United States or of any state in the United States or any action brought against us in the Supreme Court of the State of New York in the County of New York under the securities laws of the State of New York.

Walkers (Hong Kong), our counsel as to Cayman Islands law, has advised us that there is uncertainty as to whether the courts of the Cayman Islands would:

 

   

recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or

 

   

entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

Walkers (Hong Kong) has further advised us that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States (and the Cayman Islands are not a party to any treaties for the reciprocal enforcement or recognition of such judgments), a judgment obtained in such jurisdiction will be recognized and enforced in the courts of the Cayman Islands at common law, without any re-examination of the merits of the underlying dispute, by an action commenced on the foreign judgment in the Grand Court of the Cayman Islands, provided such judgment (a) is final and conclusive; (b) is one in respect of which the foreign court had jurisdiction over the defendant according to Cayman Islands conflict of law rules; (c) is either for a liquidated sum not in respect of penalties or taxes or a fine or similar fiscal or revenue obligations or, in certain circumstances, for in personam non-money relief; and (d) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.

 

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GLOSSARY

This glossary contains definitions of certain terms used in this prospectus as they relate to us. Some of these definitions may not correspond to standard industry definitions.

 

“2016 Non-Extended VML Term Loans”

the term loan commitments under the 2016 VML Credit Facility, which was repaid in August 2018

 

“2016 VML Credit Facility”

the term loans, term loan commitments and revolving credit facility available pursuant to the credit agreement dated September 21, 2011 entered into by VML US Finance LLC and VML (as amended and restated in March 2014 and June 2016), which was terminated on November 20, 2018, effective as of November 21, 2018

 

“2018 SCL Credit Facility”

the facility agreement, the Company, as borrower, entered into with the arrangers and lenders named therein and Bank of China Limited, Macau Branch, as agent for the lenders, on November 20, 2018, pursuant to which the lenders made available a US$2.0 billion revolving unsecured credit facility to the Company

 

“2018 SCL Revolving Facility”

a US$2.0 billion revolving unsecured credit facility made available by the lenders under the 2018 SCL Credit Facility entered into on November 20, 2018

 

“Adjusted Property EBITDA”

Adjusted Property EBITDA, which is a non-IFRS financial measure, is profit or loss attributable to equity holders of the Company before share-based compensation, corporate expense, pre-opening expense, depreciation and amortization, net foreign exchange gains or losses, impairment loss on property and equipment, gain or loss on disposal of property and equipment, investment properties and intangible assets, interest, gain or loss on modification or early retirement of debt and income tax benefit or expense. Management utilizes Adjusted Property EBITDA to compare the operating profitability of its operations with those of its competitors, as well as a basis for determining certain incentive compensation. Integrated resort companies have historically reported Adjusted Property EBITDA as a supplemental performance measure to IFRS financial measures. In order to view the operations of their properties on a more stand-alone basis, integrated resort companies, including the Company, have historically excluded certain expenses that do not relate to the management of specific properties, such as pre-opening expense and corporate expense, from their Adjusted Property EBITDA calculations. Adjusted Property EBITDA should not be interpreted as an alternative to profit or operating profit (as an indicator of operating performance) or to cash flows from operations (as a measure of liquidity), in each case, as determined in accordance with IFRS. The Company has significant uses of cash flow, including capital expenditures, dividend payments, interest payments, debt principal repayments and income taxes, which are not reflected in Adjusted Property EBITDA. Not all companies calculate Adjusted Property EBITDA in the same manner. As a result, Adjusted Property

 

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EBITDA as presented by the Company may not be directly comparable to other similarly titled measures presented by other companies. In addition, our Adjusted Property EBITDA presented in the report may differ from Adjusted Property EBITDA presented by LVS for its Macao segment in its filings with the SEC. For a quantitative reconciliation of Adjusted Property EBITDA to its most directly comparable IFRS measurement, see “Summary—Selected Financial Information”

 

“ADR” or “average daily rate”

the average daily rate per occupied room in a given time period, calculated as room revenue divided by the number of rooms sold

 

“Board”

the board of directors of the Company

 

“cage”

a secure room within a casino with a facility that allows patrons to exchange cash for chips required to participate in gaming activities, or to exchange chips for cash

 

“CAGR”

compound annual growth rate

 

“Capex Committee”

Sands China Capital Expenditure Committee of the Company

 

“casino(s)”

a gaming facility that provides casino games consisting of table games operated in VIP areas or mass market areas, electronic games, slot machines and other casino games

 

“Chief Executive”

a person who either alone or together with one or more other persons is or will be responsible under the immediate authority of the Board of Directors for the conduct of the business of the Company

 

“chip(s)”

tokens issued by a casino to players in exchange for cash or credit, which are used to place bets on gaming tables, in lieu of cash

 

“Company,” “our,” “we,” “us,” or “Sands China”

Sands China Ltd., a company incorporated in the Cayman Islands on July 15, 2009 as an exempted company with limited liability under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands and, except where the context otherwise requires, all of its subsidiaries, or where the context refers to the time before it became the holding company of its present subsidiaries, its present subsidiaries. When used in the context of gaming operations or the Subconcession, “we,” “us,” or “our” refers exclusively to VML

 

“Concessionaire(s)”

the holder(s) of a concession for the operation of casino games in Macao

 

“Cotai”

the name given to the land reclamation area in Macao between the islands of Coloane and Taipa

 

“Cotai Strip”

large-scale integrated resort projects on Cotai developed by us and inspired by the Las Vegas Strip in Las Vegas, Nevada, U.S.A. LVS has registered the Cotai Strip trademark in Hong Kong and Macao

 

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“COVID-19 Pandemic”

an outbreak of a respiratory illness caused by a novel coronavirus that was identified in early January 2020. The disease has since spread rapidly across the world, causing the World Health Organization to declare the outbreak a pandemic on March 12, 2020

 

“DICJ”

Gaming Inspection and Coordination Bureau (“Direcção de Inspecção e Coordenação de Jogos”) under the Secretary for Economy and Finance of Macao

 

“Director(s)”

member(s) of the board of directors of the Company

 

“DOJ”

the United States Department of Justice

 

“EBITDA”

earnings before interest, taxes, depreciation and amortization

 

“Exchange Rate”

except as otherwise stated, amounts denominated in U.S. dollars, MOP and Hong Kong dollars have been converted at the exchange rate on June 30, 2020 for the purposes of illustration only, in this prospectus at:

 

   

US$1.00: HK$7.7504

 

   

US$1.00: MOP7.9829

 

   

HK$1.00: MOP1.03

 

“FCPA”

the United States Foreign Corrupt Practices Act of 1977, as amended

 

“Four Seasons Hotel Macao”

refers to the Four Seasons Hotel Macao, Cotai Strip®, which is managed and operated by FS Macau Lda., an affiliate of Four Seasons Hotels Limited

 

“gaming area(s)”

a gaming facility that provides casino games consisting of table games operated in VIP areas or mass market areas, electronic games, slot machines and other casino games but has not been designated as a casino by the Macao government

 

“gaming promoter(s)”

individuals or corporations licensed by and registered with the Macao government to promote games of fortune and chance to patrons, through the arrangement of certain services, including extension of credit (regulated by Law No. 5/2004), transportation, accommodation, dining and entertainment, whose activity is regulated by Administrative Regulation No. 6/2002

 

“GLA”

gross leasable area

 

“GLOA”

gross leasable occupied area

 

“Greater Bay Area”

a megalopolis, also known as the Pearl River Delta, consisting of nine cities in Guangdong Province of South China, namely Guangzhou, Shenzhen, Zhuhai, Foshan, Dongguan, Zhongshan, Jiangmen, Huizhou, and Zhaoqing, and two special administrative regions namely, Hong Kong and Macao

 

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“Greater Bay Area Initiative(s)”

a policy initiative introduced in China’s 13th five-year plan (2016–2020) to promote the development of the Pearl River Delta region via economic and social integration of 11 cities in the Greater Bay Area (the most affluent and populous province in China) so that they can better leverage their competitive advantages in the global economy

 

“Group”

the Company and its subsidiaries from time to time

 

“HK$” or “HK dollars”

Hong Kong dollars, the lawful currency of Hong Kong

 

“HKSE” or “Hong Kong Stock Exchange”

The Stock Exchange of Hong Kong Limited

 

“IFRS”

International Financial Reporting Standards as issued by the International Accounting Standards Board

 

“integrated resort(s)”

a resort which provides customers with a combination of hotel accommodations, casinos or gaming areas, retail and dining facilities, MICE space, entertainment venues and spas

 

“Listing Rules”

the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (as amended from time to time)

 

“LVS” or “Las Vegas Sands”

Las Vegas Sands Corp., a company incorporated in Nevada, U.S.A. in August 2004 and the common stock of which is listed on the New York Stock Exchange

 

“LVS Group”

LVS and its subsidiaries (excluding our Group)

 

“LVS LLC”

Las Vegas Sands, LLC, a company incorporated in Nevada, U.S.A.

 

“LVS Nevada”

LVS (Nevada) International Holdings, Inc., a company incorporated in Nevada, U.S.A.

 

“mass market player(s)”

Non-Rolling Chip and slot players

 

“MICE”

Meetings, Incentives, Conventions and Exhibitions, an acronym commonly used to refer to tourism involving large groups brought together for an event or corporate meeting

 

“MOP” or “pataca(s)”

Macao pataca, the lawful currency of Macao

 

“Parcel 1”

a land parcel on Cotai totaling 290,562 square meters described under Registration No. 23225 by the Macao Property Registry, on which The Venetian Macao has been constructed

 

“Parcel 2”

a land parcel on Cotai totaling 53,303 square meters described under Registration No. 23223 by the Macao Property Registry, on which The Plaza Macao has been constructed

 

“Parcel 3”

a land parcel on Cotai totaling 61,681 square meters described under Registration No. 23224 by the Macao Property Registry, on which The Parisian Macao has been constructed

 

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“Parcels 5 and 6”

land parcels on Cotai totaling 150,134 square meters, including 44,576 square meters designated as a tropical garden, described under Registration No. 23288 by the Macao Property Registry, on which Sands Cotai Central has been constructed

 

“premium player(s)”

Rolling Chip players who have a direct relationship with gaming operators and typically participate in gaming activities in casinos or gaming areas without the use of gaming promoters

 

“Professional Investors”

as defined in Chapter 37 of the Listing Rules and in the SFO

 

“Renminbi”

Renminbi, the lawful currency of China

 

“Rolling Chip play”

play by VIP and premium players (excludes Paiza cash players) using non-negotiable chips

 

“Rolling Chip volume”

casino revenue measurement, measured as the sum of all non-negotiable chips wagered and lost by VIP and premium players (excludes Paiza cash players)

 

“Rolling Chip win”

a percentage of Rolling Chip volume

 

“Sands”

a land parcel in Macao totaling 26,082 square meters described under Registration No. 23114 by the Macao Property Registry, on which Sands Macao has been constructed

 

“Sands Cotai Central”

an integrated resort which currently features four hotel towers, consisting of hotel rooms and suites under the Conrad, Sheraton and St. Regis brands. Sands Cotai Central also includes gaming area, retail, entertainment, dining and MICE facilities. It is expected to be rebranded as “The Londoner Macao”

 

“Sands Macao”

the Sands Macao, which includes gaming areas, a hotel tower, restaurants and a theater

 

“Senior Notes”

senior unsecured notes issued by the Company or, where relevant, any or all of: (i) the three series of senior unsecured unregistered notes in an aggregate principal amount of US$5,500,000,000 issued on August 9, 2018, consisting of US$1,800,000,000 of 4.600% senior notes due August 8, 2023, US$1,800,000,000 of 5.125% senior notes due August 8, 2025 and US$1,900,000,000 of 5.400% senior notes due August 8, 2028. Pursuant to an exchange offer launched on December 21, 2018 and which expired on January 25, 2019, US$1,695,850,000 of 4.600% senior notes due August 8, 2023, US$1,786,475,000 of 5.125% senior notes due August 8, 2025 and US$1,892,760,000 of 5.400% senior notes due August 8, 2028, were exchanged for new notes that were registered under the U.S. Securities Act, on January 29, 2019, and pursuant to the filing of a Form 15F with the SEC on April 23, 2019, had their reporting obligations under Section 15(d) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), terminated; and (ii) the two series of senior unsecured unregistered notes in an aggregate

 

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principal amount of US$1,500,000,000 issued on June 4, 2020, consisting of US$800,000,000 of 3.800% senior notes due January 8, 2026 and US$700,000,000 of 4.375% senior notes due June 18, 2030

 

“SFO”

the Securities and Futures Ordinance of Hong Kong (Cap. 571 of the Laws of Hong Kong) as amended, supplemented or otherwise modified from time to time

 

“Subconcession” or “Subconcession Contract”

the tripartite Subconcession Contract for the operation of casino games effective December 26, 2002 among Galaxy Casino S.A., the Macao government and VML

 

“Subconcessionaire(s)”

the holder(s) of a subconcession for the operation of casino games in Macao

 

“table games”

typical casino games, including card games such as baccarat, blackjack and hi-lo (also known as “sic bo”) as well as craps and roulette

 

“The Parisian Macao”

an integrated resort that includes a gaming area, hotel, a shopping mall and other integrated resort amenities

 

“The Plaza Macao”

an integrated resort which includes (i) the Four Seasons Hotel Macao; (ii) the Plaza Casino gaming area operated by VML; (iii) the Paiza Mansions, the Shoppes at Four Seasons, restaurants and a spa, each of which are operated by us; and (iv) The Grand Suites at Four Seasons, which features 289 premium quality suites, except where the context indicates otherwise

 

“The Venetian Macao”

The Venetian® Macao-Resort-Hotel, an integrated resort that includes casino and gaming areas, a hotel, MICE space, the Shoppes at Venetian, approximately 60 different restaurants and food outlets, a 15,000-seat arena and other entertainment venues

 

“Trustee”

U.S. Bank National Association

 

“United States,” “U.S.” or “U.S.A.”

the United States of America, including its territories and possessions and all areas subject to its jurisdiction

 

“US$” or “U.S. dollars”

United States dollars, the lawful currency of the United States

 

“Venetian Casino”

Venetian Casino Resort, LLC, a company incorporated in Nevada, U.S.A.

 

“VIP player(s)”

Rolling Chip players who play almost exclusively in dedicated VIP rooms or designated casino or gaming areas and are sourced from gaming promoters

 

“VIP room(s)”

rooms or designated areas within a casino or gaming area where VIP players and premium players gamble

 

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“visit(s)” or “visitation(s)”

with respect to visitation of our properties, the number of times a property is entered during a fixed time period. Estimates of the number of visits to our properties is based on information collected from digital cameras placed above every entrance in our properties, which use video signal image processor detection and include repeat visitors to our properties on a given day

 

“VML”

our subsidiary, Venetian Macau, S.A. (also known as Venetian Macau Limited), a public company limited by shares (“sociedade anónima”) incorporated on June 21, 2002 under the laws of Macao, one of the three Subconcessionaires and the holder of the Subconcession

 

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SUMMARY

This summary does not contain all the information that may be important to you in deciding whether to invest in the Notes. You should read this entire prospectus, including the section entitled “Risk Factors” and the financial statements and related notes thereto, before making an investment decision.

We are the leading developer, owner and operator of large-scale integrated resorts in Macao, as measured by Adjusted Property EBITDA for the year ended December 31, 2019. In 2019, we welcomed approximately 98 million leisure and business visits at our properties on Cotai and on the Macao Peninsula.

Our founder, Chairman and Chief Executive Officer, Mr. Sheldon G. Adelson, began investing in Macao from 2002 after receiving a gaming subconcession to operate casino games and other games of chance. His vision and goal was to develop large-scale integrated resorts with a variety of world-class amenities and create an international tourism destination. This helped achieve Macao’s objective for long-term economic diversification and growth in tourism.

Today, with nearly 30 million square feet of interconnected facilities on Cotai, we are the largest integrated resorts operator in Macao. Our integrated resorts not only offer gaming areas, but also the most four- and five-star rated hotel rooms compared to any other single developer in the market. Our integrated resorts also collectively feature the largest capacity in meeting space, convention and exhibition halls, retail and dining areas and entertainment venues. We believe our integrated resorts are unique in Macao and differentiate us from our competitors due to size and scale, range of non-gaming amenities, and focus on leisure and business tourism.

Macao is the largest gaming market in the world based on casino gaming revenue and is the only location in China to offer legalized casino gaming. VML, our subsidiary, holds one of six concessions or subconcessions permitted by the Macao government to operate casinos or gaming areas.

We developed, own and operate The Venetian Macao, Sands Cotai Central, The Parisian Macao, The Plaza Macao and Sands Macao. We also own the Cotai Expo, one of the largest convention and exhibition centers in Asia, as well as Macao’s largest entertainment venue, the Cotai Arena. Our properties collectively feature over 11,700 luxury suites and hotel rooms, approximately 150 different restaurants and food outlets, spas and theaters for live performances, as well as other integrated resort amenities.

Our integrated resort brands, including The Venetian Macao and The Parisian Macao, are aspirational and recognized throughout China and Asia for quality and service and leave a lasting impression on our customers. We believe The Venetian Macao is the most visited integrated resort in Asia, and since its opening in 2007, the property has received over 366 million visitations as of December 31, 2019. We estimate that since 2016, The Parisian Macao digital marketing and social media program has reached over 13 billion online impressions, including from platforms within China such as Sina Weibo.

We were the first developer in Macao to feature world-class global hospitality brands in our hotel offerings on Cotai, including the Four Seasons, St. Regis, Conrad and Sheraton.

Within our integrated resorts we also operate some of the largest and most profitable retail malls in Asia, showcasing over 780 shops occupying over 2 million square feet of retail space. Our retail malls showcase many global luxury designer brands as well as leading Asian retail brands.

We own and operate Cotai Water Jet, one of two major high speed ferry operators between Hong Kong and Macao, with 14 vessels facilitating leisure and business travelers to reach Macao from points in Hong Kong, including the Hong Kong International Airport.



 

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Our Developments in Macao

In May 2004, we opened the Sands Macao, the first Las Vegas-style resort in Macao, which was designed for the mass market segment of leisure tourism. The Sands Macao currently contains a mix of gaming areas for mass market, VIP and premium players, entertainment and dining facilities, and hotel suites.

In August 2007, we opened The Venetian Macao, the flagship property of our Cotai Strip development. The Venetian Macao is a themed, large-scale integrated resort, with 2,905 luxury hotel suites, more than 340 retail shops in one of the largest shopping malls in Asia with 943,000 square feet of retail space, approximately 60 restaurants and food outlets, and a state-of-the-art live performance theater with 1,800 seats. In addition, The Venetian Macao contains the Cotai Arena, a 15,000-seat venue directly adjacent to and adjoins the Cotai Expo and hosts a wide range of entertainment and sporting events each year. The Cotai Expo is a 1.2 million square foot MICE facility, which includes exhibition and meeting space, including one of the largest column-free ballrooms in Asia.

In August 2008, we opened The Plaza Macao, a boutique luxury integrated resort featuring the Four Seasons Hotel Macao with 360 luxury suites, the Shoppes at Four Seasons with nearly 140 shops from the world’s leading luxury retail brands, and the Plaza Casino. In July 2009, we completed and introduced our ultra-exclusive Paiza Mansions at The Plaza Macao.

Since April 2012, Sands Cotai Central has opened in phases. The property features four hotel towers: the first hotel tower, which opened in April 2012, consisting of 659 five-star rooms and suites under the Conrad brand and approximately 600 London-themed suites upon completion of The Londoner Macao Hotel; the second hotel tower, which opened in September 2012, consisting of 1,842 rooms and suites under the Sheraton brand; the third hotel tower, which opened in January 2013, consisting of 2,126 rooms and suites under the Sheraton brand; and the fourth tower, which opened in December 2015, consisting of 400 rooms and suites under the St. Regis brand. Sands Cotai Central also has approximately 369,000 square feet of meeting space, a 1,701-seat theater and approximately 525,000 square feet of retail space with more than 140 stores and over 40 restaurants and food outlets.

In September 2016, we opened The Parisian Macao, a themed, iconic, “must-see” integrated resort connected to The Venetian Macao and The Plaza Macao, which includes a 248,000 square foot casino, a hotel with approximately 2,500 rooms and suites, retail, entertainment, dining and meeting facilities. The Parisian Macao features a half size replica of the Eiffel Tower, providing a landmark attraction to visitors.

In 2017, we announced the renovation, expansion and rebranding of Sands Cotai Central into a new destination integrated resort, The Londoner Macao, by adding extensive thematic elements both externally and internally. The Londoner Macao will include some of London’s most recognizable landmarks such as the Houses of Parliament and Big Ben. The resort will feature two new hotels, the Londoner Court with approximately 370 luxury suites, and The Londoner Macao Hotel with approximately 600 suites. Suites are being utilized as they are completed on a simulation basis for trial and feedback purposes. A number of new restaurants will open progressively from late 2020. Our retail offerings will be expanded and rebranded as the Shoppes at Londoner. Construction work on the conversion of Sands Cotai Central into the new integrated resort The Londoner Macao is progressing. We expect the Londoner Court suites to be completed in late 2020, and overall The Londoner Macao project to be delivered in phases throughout 2020 and 2021.

Construction of The Grand Suites at Four Seasons is now complete. This unique apart-hotel features 289 luxury suites for the growing segment of affluent visitors who travel with family for extended periods. We have initiated approved gaming operations in this space and are utilizing suites on a simulation basis for trial and feedback purposes.



 

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We anticipate the total costs associated with these development projects to be approximately US$2.2 billion. The ultimate costs and completion dates for these projects are subject to change as we complete construction. See “Risk Factors—Risks Related to Our Business—There are significant risks associated with our construction projects.”

Our business strategy is to develop Cotai and to leverage our large-scale integrated resort business model to create Asia’s premier gaming, leisure, convention and meetings destination. Our interconnected integrated resorts, which have a wide range of branded hotel and resort offerings, are designed to attract different segments of the market throughout the year. We believe our business strategy and development plan will allow us to achieve a more consistent demand, longer average length of stay in our hotels, more diversified sources of revenue and higher margins than gaming-centric facilities.

Key Strengths

We believe we have a number of key strengths that differentiate our business from our competitors, including:

High quality and diverse range of integrated resort offerings with substantial non-gaming amenities

Our integrated resorts feature non-gaming attractions and amenities including world-class entertainment, expansive retail offerings and market-leading MICE facilities. These attractions and amenities enhance the appeal of our integrated resorts, contributing to visitation, length of stay and customer spending at our resorts. As of December 31, 2019, our hotel inventory represented approximately 46% of the total Macao competitor hotel inventory. The broad appeal of our market-leading integrated resort offerings in Macao enables us to serve the broadest array of customer segments in the Macao market.

Substantial and diversified cash flow from existing operations

We generated a market-leading US$3.19 billion of Adjusted Property EBITDA during the year ended December 31, 2019 from gaming and non-gaming sources, including retail, hotel, food and beverage, entertainment and MICE business. Approximately 29% of our departmental profit was generated by non-gaming offerings for the year ended December 31, 2019.

Market leadership in the growing high-margin mass market gaming segment

We focus on the high-margin mass gaming segment, which has grown at a CAGR in excess of 10% since fiscal year 2015. During the twelve months ended December 31, 2019, we had the highest percentage of gaming win from mass tables and slots of the Macao operators, with approximately 29% market share. Our management estimates our mass market table revenues typically generate a gross margin that is approximately four times higher than the gross margin on our typical VIP table revenues.

Established brands with broad regional and international market awareness and appeal

Our brands, including The Venetian Macao, The Parisian Macao, Sands Macao, Cotai Expo, Cotai Arena and Cotai Water Jet enjoy broad regional and international market awareness and appeal. We welcomed approximately 98 million visits to our property portfolio in 2019. We believe The Venetian Macao is the most visited integrated resort in Macao, and attracts broad brand awareness both regionally and globally. We estimate that since 2016, The Parisian Macao digital marketing and social media program has reached over 13 billion online impressions, including from platforms within China such as Sina Weibo.



 

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Experienced management team with a proven track record

Mr. Sheldon G. Adelson is our founder, Chairman and Chief Executive Officer. Mr. Adelson’s business career spans more than seven decades and has included creating and developing numerous companies to maturity. Mr. Adelson created the MICE-based integrated resort and pioneered its development in the Las Vegas and Singapore markets, as well as in Macao, where he planned and developed the Cotai Strip. Dr. Wong Ying Wai (Wilfred), our President, Mr. Chum Kwan Lock (Grant), our Chief Operating Officer, Mr. Sun MinQi (Dave), our Chief Financial Officer, and Mr. Dylan James Williams, our General Counsel and Company Secretary, have substantial business experience and have successfully contributed to the execution of our operating strategies.

Unique MICE and entertainment facilities

Our market-leading MICE and entertainment facilities contribute to Macao’s diversification and appeal to business and leisure travelers while diversifying our cash flows and increasing revenues and profit. Our approximately 1.7 million square feet of MICE space is specifically designed to meet the needs of meeting planners and corporate events and trade show organizers from around the world. Our experience and expertise in this industry continues to drive leisure and business tourism to Macao. Since opening in 2007, our 15,000-seat Cotai Arena has established itself as one of the top live entertainment venues in Southern China. The theaters at The Venetian Macao, Sands Cotai Central and The Parisian Macao offer a variety of ticketed events. The live entertainment program at our properties is a key traffic driver and has established the Company as the leader in the field of tourism and leisure activities.

Significant benefits from our on-going relationship with LVS

Sands China is approximately 70% owned by Las Vegas Sands, the world’s leading developer and operator of MICE-based integrated resorts. The operating experience of Las Vegas Sands in developing and operating MICE-based integrated resorts in the Las Vegas, Singapore and Macao markets is a significant benefit to us.

Business Strategies

Building on our key strengths, we seek to enhance our position as the leading developer and operator of integrated resorts and casinos in Macao by continuing to implement the following business strategies:

Developing and diversifying our integrated resort offerings on Cotai to include a full complement of products and services to cater to different market segments. Our development on Cotai includes four integrated resorts, MICE space, additional retail, dining and entertainment facilities and a range of hotel offerings to cater to different segments of the market. In addition to The Venetian Macao and The Parisian Macao hotel rooms, we have Four Seasons, Conrad, Sheraton and St. Regis branded suites and hotel rooms. We are able to leverage the recognition and the sales, marketing and reservation capabilities of these premier hotel brands to attract a wide range of customers in different market segments to our properties. We believe our partnerships with renowned hotel management partners, our diverse integrated resort offerings and the convenience and accessibility of our properties will continue to increase the appeal of our properties to both the business and leisure customer segments.

Leveraging our scale of operations to create and maintain an absolute cost advantage. Management expects to benefit from lower unit costs due to the economies of scale inherent in our operations. Opportunities for lower unit costs include, but are not limited to, lower utility costs; more efficient staffing of hotel and gaming operations; and centralized transportation, marketing and sales, and procurement. In addition, our scale allows us to consolidate certain administrative functions.



 

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Focusing on the high-margin mass market gaming segment, while continuing to provide luxury amenities and high service levels to our VIP and premium players. Our properties cater not only to VIP and premium players, but also to mass market customers, which comprise our most profitable gaming segment. We believe the mass market segment will continue to have long-term growth as a result of the introduction of more high-quality gaming facilities and non-gaming amenities into the market. Our management estimates our mass market table revenues typically generate a gross margin that is approximately four times higher than the gross margin on our typical VIP table revenues.

Identifying targeted investment opportunities to drive growth across our portfolio. We will continue to invest in the expansion of our facilities and the enhancement of the leisure and business tourism appeal of our Cotai property portfolio. Our planned development projects include the renovation, expansion and rebranding of Sands Cotai Central into The Londoner Macao, the addition of suites at The Grand Suites at Four Seasons and at the Londoner Court and the conversion of the prior Holiday Inn-branded rooms and suites into suites in The Londoner Macao Hotel.

Recent Developments

COVID-19 Pandemic

In early January 2020, an outbreak of a respiratory illness caused by a novel coronavirus was identified and the disease has since spread rapidly across the world causing the World Health Organization to declare the outbreak of a pandemic on March 12, 2020. As a result, people across the globe have been advised to avoid non-essential travel. Steps have also been taken by various countries to restrict inbound international travel and implement closures of non-essential operations to contain the spread of the virus.

Visitation to Macao has decreased substantially, driven by various government policies limiting travel. The China Individual Visit Scheme to Macao (“China IVS”) and tour group visas were suspended, and a complete ban on entry or a need to undergo enhanced quarantine requirements depending on the person’s residency and their recent travel history, has been enacted by the Macao government for Macao residents, citizens of mainland China, Hong Kong residents, foreigner workers residing in Macao and international travelers.

The Macao government suspended all gaming operations beginning on February 5, 2020. The Group’s casino operations resumed on February 20, 2020, except for casino operations at Sands Cotai Central, which resumed on February 27, 2020. Certain health safeguards, however, such as limiting the number of seats per table game, slot machine spacing, temperature checks, mask protection, health declarations showing green health-codes, and negative COVID-19 test results, remain in effect at the present time. The Group is currently unable to determine when these measures will be modified or cease to be necessary.

Some of the Group’s hotel facilities were also closed during the casino suspension in response to the drop in visitation and, with the exception of the Conrad Macao, Cotai Strip at Sands Cotai Central (the “Conrad hotel”), these hotels were gradually reopened from February 20, 2020, in line with operational needs and demand. The Conrad hotel reopened on June 13, 2020. Additionally, in support of the Macao government’s initiatives to fight the COVID-19 Pandemic, the Group provided one tower (approximately 2,000 hotel rooms) at the Sheraton Grand Macao Hotel, Cotai Strip at Sands Cotai Central to the Macao government to house individuals who return to Macao for quarantine purposes during two different periods in 2020.

A limited number of restaurants across the Group’s properties have reopened. The majority of retail outlets in the Group’s various shopping malls are open with reduced operating hours. The timing and manner in which these areas will return to full operation are currently unknown.



 

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The Hong Kong government temporarily closed the Hong Kong China Ferry Terminal in Kowloon on January 30, 2020 and the Hong Kong Macau Ferry Terminal in Hong Kong on February 4, 2020. In response, the Group suspended its Macao ferry operations between Macao and Hong Kong. From June 17, 2020 until July 16, 2020, Cotai Water Jet operated a special sailing service between the Taipa Ferry Terminal and Hong Kong International Airport to facilitate the return of Macao residents from overseas and to enable the return of those located in Macao to their place of origin. The timing and manner in which the Group’s normal ferry operations will be able to resume are currently unknown.

As of June 30, 2020, Macao has had 46 confirmed cases of COVID-19 and no deaths attributed to COVID-19 according to data published by the Macao government.

The Macao government announced total visitation from mainland China to Macao on a monthly basis decreased by 14.9% (with an 83.3% decrease in visitation over the first seven days of Chinese New Year Holiday) in January 2020 and decreased in a range of 96.3% to 99.6% in February to June 2020, as compared to the same periods in 2019. It also announced monthly gross gaming revenue decreased by 11.3% in January 2020 and decreased in a range of 79.7% to 97.0% in February to June 2020 as compared to the same periods in 2019.

Current Impact of the COVID-19 Pandemic on our Liquidity and Financial Results

The disruptions arising from the COVID-19 Pandemic had a significant adverse impact on the Group’s operations during the six months ended June 30, 2020. Net revenues for the six months ended June 30, 2020, totaled US$848 million compared to US$4.47 billion for the six months ended June 30, 2019, representing a decrease of 81.0%. We recorded an operating loss of US$609 million and a net loss of US$716 million in the first half of 2020, as compared to an operating income of US$1.19 billion and a net income of US$1.07 billion in the same period in the prior year. Adjusted property EBITDA loss totaled US$243 million in the half year ended June 30, 2020, as compared to adjusted property EBITDA of US$1.63 billion in the same period in the prior year. For a quantitative reconciliation of Adjusted Property EBITDA to its most directly comparable IFRS measurement, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of Non-IFRS Financial Measures.”

As of June 30, 2020, the Group had total liquidity of US$3.63 billion, consisting of US$1.61 billion of total cash and cash equivalents and US$2.02 billion of available borrowing capacity under the 2018 SCL Revolving Facility. The Group believes it will be able to support its continuing operations, complete the major construction projects that are underway, and respond to the current COVID-19 Pandemic challenges. The Group has taken various mitigating measures to manage through the current environment, including a cost and capital expenditure reduction program to minimize cash outflow of non-essential items. On April 17, 2020, the Company announced that the Board resolved not to recommend the payment of a final dividend in respect of the year ended December 31, 2019.

If the Group’s integrated resorts are not permitted to resume normal operations, travel restrictions such as those related to the China IVS and other global restrictions on inbound travel from other countries are not modified or eliminated or the global response to contain the COVID-19 Pandemic escalates or is unsuccessful, the Group’s operations, cash flows and financial condition will be further materially impacted. The duration and intensity of this global health emergency and related disruptions are uncertain. Given the dynamic nature of these circumstances, the impact on the Company’s consolidated results of operations, cash flows and financial condition in 2020 will be material. The Group cannot reasonably estimate the impact at this time. It is unknown when the COVID-19 Pandemic will end, when or how quickly the current travel restrictions will be modified or cease to be necessary and the resulting impact on the Group’s business and the willingness of the Group’s customers to spend on travel, entertainment and MICE. See “Risk Factors—Risks Related to our Business—The COVID-19 Pandemic has adversely affected the number of visitors to our facilities and disrupted our operations,



 

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resulting in lower revenues and cash flows. This adverse impact is anticipated to continue until the global COVID-19 Pandemic is contained.”

As a result of the impact from the COVID-19 Pandemic, the 2018 SCL Credit Facility was amended on March 27, 2020 to waive certain financial covenants through July 1, 2021 and was further amended on September 11, 2020 to extend the waiver period through January 1, 2022. Additionally, the 2018 SCL Credit Facility was amended to provide the Company with the option to increase the total available borrowing capacity by an additional US$1.0 billion.

Outlook

Despite the current impact from the COVID-19 Pandemic, the Group is encouraged by recent announcements regarding changes to travel policies, which we believe represent the first steps towards the recovery of tourism in Macao. On July 13, 2020, it was announced that Chinese nationals with negative COVID-19 test result and green health-code, traveling between any of the nine designated cities in Guangdong province and Macao, are exempt from the 14-day mandatory quarantine effective from July 15, 2020. This was subsequently extended to all cities within the Guangdong province effective from July 29, 2020, followed by all of mainland China effective from August 12, 2020. The China IVS and tour group visas recommenced for certain regions beginning on August 12, 2020 and were extended to all of mainland China effective September 23, 2020. Hong Kong and Taiwanese residents who have not visited a foreign country in the prior 14 days and tested negative for COVID-19 are allowed to enter Macao subject to a mandatory 14 days of centralized isolation. All other foreign nationals, including those holding a temporary work permit, currently are not permitted to enter Macao.

The Group remains steadfast in its commitments to the health and safety of its team members and customers and to providing assistance to Macao’s local community. The Group remains confident that travel and tourism spending in Macao will eventually fully recover. The Group has made progress in the execution of the US$2.2 billion capital investment program for The Londoner Macao and The Grand Suites at Four Seasons. The Group believes these capital investment programs will strengthen its leadership position in the market and will provide a larger platform for future growth as travel and tourism spending return.



 

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Organizational Chart

The following chart illustrates our simplified corporate structure as of the date of this prospectus.

 

 

LOGO

 

 

(i)

Venetian Venture Development Intermediate Limited has 100% economic interest in Venetian Macau Limited. 10% of Venetian Macau Limited’s share capital is held by Mr. Antonio Ferreira subject to a usufruct agreement. See “Regulation.”



 

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Our Corporate Information

Our principal executive offices are located at The Venetian Macao Resort Hotel, L2 Executive Offices, Estrada da Baía de N. Senhora da Esperança, s/n, Macao. Our telephone number at this address is +853 8118-2888. Our registered office in the Cayman Islands is located at the offices of Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands. Our agent for service of process in the United States is Corporation Service Company located at 1180 Avenue of the Americas, Suite 210, New York, New York 10036. Our corporate website is www.sandschina.com. The information contained on our website is not a part of this prospectus. The Company’s principal place of business in Hong Kong is Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong. The name and address of the person in Hong Kong authorized to accept service of process and notices on the Company’s behalf is Ho Siu Pik, Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.



 

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SUMMARY OF THE TERMS OF THE EXCHANGE OFFER

The following is a general summary of the terms of the exchange offer. This summary should be read in conjunction with, and is qualified in its entirety by, more detailed information appearing elsewhere in this prospectus, including under “The Exchange Offer” and “Description of Notes.”

On June 4, 2020, we completed a private offering of US$800 million aggregate principal amount of the Outstanding 2026 Notes and US$700 million aggregate principal amount of the Outstanding 2030 Notes, in a transaction exempt from the registration under the Securities Act. This prospectus is part of a registration statement covering the exchange of the Outstanding Notes for the Notes.

We entered into a registration rights agreement with the initial purchasers in the private offering in which we agreed to deliver to you this prospectus as part of the exchange offer and we agreed to use our commercially reasonable efforts to cause the exchange offer registration statement to become effective under the Securities Act within 365 days after the closing date. In the exchange offer, you are entitled to exchange your Outstanding Notes for the Notes that are identical in all material respects to the Outstanding Notes, except that the Notes have been registered under the Securities Act and will not have any of the transfer restrictions, any of the registration rights provisions and certain inapplicable interest provisions relating to the Outstanding Notes.

 

Exchange Offer

We are offering to exchange the newly issued Notes in the following respective series in up to the following aggregate principal amounts:

 

   

US$800 million 2026 Notes; and

 

   

US$700 million 2030 Notes,

 

  for a like aggregate principal amount of the following respective series of the Outstanding Notes:

 

   

the Outstanding 2026 Notes; and

 

   

the Outstanding 2030 Notes, respectively.

 

  The exchange offer is being made with respect to all of the Outstanding Notes. Only holders of Outstanding Notes who are Professional Investors may participate in the exchange offer. Outstanding Notes may only be exchanged in minimum denominations of US$200,000 and integral multiples of US$1,000 above that amount. The Outstanding Notes surrendered in exchange for the Notes will be retired and canceled and cannot be reissued, and the rights under the Outstanding Notes for those who tender their Outstanding Notes will be extinguished after the completion of the exchange offer.

 

Resales of the Notes

Based on an interpretation of the staff of the SEC set forth in no action letters issued to unrelated third parties, we believe that Notes issued pursuant to the exchange offer in exchange for Outstanding Notes may be offered for resale, resold and otherwise transferred by you (unless you are an affiliate of ours, within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the Notes are acquired in the ordinary course of your



 

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business and you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the Notes.

 

  Each participating broker-dealer that receives Notes for its own account pursuant to the exchange offer in exchange for Outstanding Notes that were acquired as a result of market-making or other trading activity must acknowledge that it will deliver a prospectus (or, to the extent permitted by law, make available a prospectus to purchasers) in connection with any resale of the Notes, which prospectus delivery requirement may be satisfied by the delivery of this prospectus, as it may be amended or supplemented from time to time.

 

  Any holder of Outstanding Notes who:

 

   

is an affiliate of ours;

 

   

does not acquire Notes in the ordinary course of business; or

 

   

tenders in the exchange offer with the intention to participate, or for the purpose of participating, in the distribution of the Notes

 

  cannot rely on the position of the staff of the SEC enunciated in Exxon Capital Holdings Corporation or similar interpretive letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with the resale of the Notes and be identified as an underwriter in the prospectus. See “The Exchange Offer—Resales of the Notes.”

 

No Minimum Condition

The exchange offer is not conditioned on any minimum aggregate principal amount of any series of Outstanding Notes being tendered for exchange.

 

Expiration Date; Withdrawal of Tenders

The exchange offer will expire at 5:00 p.m., New York City time, on                 , 2021, unless we extend it. Tenders of Outstanding Notes pursuant to the exchange offer may be withdrawn at any time prior to the expiration date. Any Outstanding Notes not accepted for exchange for any reason will be returned without expense to the tendering holder promptly after the expiration or termination of the exchange offer. See “The Exchange Offer—Expiration Date; Extensions; Amendments” and “The Exchange Offer—Withdrawal of Tenders.”

 

Settlement Date

The settlement date of the exchange offer will be promptly following the expiration date.

 

Conditions to the Exchange Offer

The exchange offer is subject to customary conditions, which we may waive in our sole discretion. See “The Exchange Offer—Conditions to the Exchange Offer” for more information regarding the conditions to the exchange offer. We have the right, in our sole discretion, to



 

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terminate or withdraw the exchange offer if any of the conditions described under “The Exchange Offer—Conditions to the Exchange Offer” are not satisfied or waived.

 

Appraisal Rights

Holders of Outstanding Notes do not have any rights of appraisal for their Outstanding Notes if they elect not to tender their Outstanding Notes for exchange.

 

Procedures for Tendering Outstanding Notes

If you wish to accept the exchange offer, you must complete, sign and date the accompanying letter of transmittal, or a facsimile of the letter of transmittal, according to the instructions contained in this prospectus and the letter of transmittal. You must also mail or otherwise deliver the letter of transmittal, or a facsimile of the letter of transmittal, together with any physical certificates requesting the Outstanding Notes and any other required documents, to the exchange agent at the address set forth on the cover page of the letter of transmittal. If you hold Outstanding Notes through The Depository Trust Company (the “DTC”) and wish to participate in the exchange offer, you must comply with the Automated Tender Offer Program procedures of DTC (“ATOP”), by which you will agree to be bound by the letter of transmittal. By signing, or agreeing to be bound by the letter of transmittal, you will represent to us that, among other things:

 

   

any Notes that you receive will be acquired in the ordinary course of your business;

 

   

you have no arrangement or understanding with any person or entity to participate in a distribution of the Notes;

 

   

if you are a broker-dealer that will receive Notes for your own account in exchange for Outstanding Notes that were acquired as a result of market-making activities, that you will deliver a prospectus, as required by law, in connection with any resale of the Notes;

 

   

you are not an affiliate, as defined in Rule 405 of the Securities Act, of ours or, if you are an affiliate of ours, you will comply with any applicable registration and prospectus delivery requirements of the Securities Act; and

 

   

you are a Professional Investor.

 

  See “The Exchange Offer—Procedures for Tendering” and “Plan of Distribution.”

 

Special Procedures for Beneficial Owners

If you are a beneficial owner of Outstanding Notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender the Outstanding Notes in the exchange offer, you should contact that registered holder promptly and instruct that registered holder to tender on your behalf. If you



 

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wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your Outstanding Notes, either make appropriate arrangements to register ownership of the Outstanding Notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date. See “The Exchange Offer— Procedures for Tendering.”

 

Effect on Holders of Outstanding Notes

As a result of the making of, and upon acceptance for exchange of all validly tendered Outstanding Notes pursuant to the terms of the exchange offer, we will have fulfilled a covenant contained in the registration rights agreement and, accordingly, there will be no increase in the interest rate on the Outstanding Notes under the circumstances described in the registration rights agreement. If you are a holder of Outstanding Notes and you do not tender your Outstanding Notes in the exchange offer, you will continue to hold the Outstanding Notes, and you will be entitled to all the rights and limitations applicable to the Outstanding Notes in the Indenture, except for any rights under the registration rights agreement that by their terms terminate upon the consummation of the exchange offer.

 

  The Outstanding Notes are listed on the Hong Kong Stock Exchange by way of debt issues to Professional Investors only. To the extent Outstanding Notes are tendered and accepted in the exchange offer, the trading market for Outstanding Notes could be adversely affected.

 

Consequence of Failure to Exchange

All untendered Outstanding Notes will continue to be subject to the restrictions on transfer provided for in the Outstanding Notes and in the Indenture. In general, the Outstanding Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, we do not currently anticipate that we will register the Outstanding Notes under the Securities Act. See “The Exchange Offer—Consequences of Failure to Exchange.”

 

Taxation

The exchange of the Outstanding Notes for the Notes pursuant to the exchange offer will not be a taxable transaction for United States federal income tax or Cayman Islands law purposes. See the discussion under the caption “Taxation” for more information regarding the tax consequences to you of the exchange offer.

 

Use of Proceeds

We will not receive any proceeds from the issuance of Notes pursuant to the exchange offer.

 

Accounting Treatment

We will not recognize any gain or loss on the exchange of Notes. See “The Exchange Offer—Accounting Treatment.”


 

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Exchange Agent

U.S. Bank National Association is serving as exchange agent in connection with the exchange offer. The contact information for the exchange agent is set forth in the section captioned “The Exchange Offer—Exchange Agent” of this prospectus.


 

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SUMMARY OF THE TERMS OF THE NOTES

The following is a general summary of the terms of the Notes. This summary should be read in conjunction with, and is qualified in its entirety by, more detailed information appearing elsewhere in this prospectus, including under “Description of Notes.”

The Notes are identical in all material respects to the Outstanding Notes, except that the Notes have been registered under the Securities Act and will not have any of the transfer restrictions, any of the registration rights provisions and certain inapplicable interest provisions relating to the Outstanding Notes. The Notes will evidence the same debt as the Outstanding Notes exchanged therefor and be entitled to the benefits of the Indenture.

 

Issuer

Sands China Ltd.

 

Notes Offered

Up to US$800,000,000 aggregate principal amount of 2026 Notes and up to US$700,000,000 aggregate principal amount of 2030 Notes.

 

Maturity Date

  2026 Notes: January 8, 2026

 

   

2030 Notes: June 18, 2030

 

Interest

The 2026 Notes will bear interest at a rate of 3.800% per annum and the 2030 Notes will bear interest at a rate of 4.375% per annum. In the case of the 2026 Notes, interest will be payable semi-annually in arrears on January 8 and July 8 of each year, with the first interest payment on January 8, 2021. In the case of the 2030 Notes, interest will be payable semi-annually in arrears on December 18 and June 18 of each year, with the first interest payment on December 18, 2020. Interest will accrue from the issue date.

 

  The interest rate on the Notes may be adjusted under certain circumstances as set forth under “Description of Notes—Interest Rate Adjustment.”

 

Ranking of Notes

The Notes will be general unsecured obligations of the Company and will (1) rank equally in right of payment with all of the Company’s existing and future senior unsecured indebtedness, (2) rank senior to all of the Company’s future subordinated indebtedness, if any, (3) be effectively subordinated to all of the Company’s future secured indebtedness to the extent of the value of the assets securing such debt, and (4) be structurally subordinated to all existing and future obligations of the Company’s subsidiaries. See “Description of Notes—Brief Description of the Notes.” As of June 30, 2020, the Company had US$7.0 billion of unsecured borrowings outstanding under the Senior Notes and US$2.02 billion of available borrowing capacity under the 2018 SCL Revolving Facility. We may incur additional secured and/or unsecured indebtedness and other obligations in the future.

 

Optional Redemption

2026 Notes: At its option, the Company may redeem the 2026 Notes, in whole or in part, at any time or from time to time prior to their



 

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stated maturity. The redemption price for 2026 Notes that are redeemed before December 8, 2025 will be equal to the greater of (a) 100% of the principal amount of the 2026 Notes to be redeemed and (b) a “make-whole” amount described elsewhere in this prospectus, plus in either case accrued and unpaid interest to, but not including, the redemption date. On or after December 8, 2025, we may redeem the 2026 Notes, in whole or in part, at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest to, but not including, the redemption date.

 

  2030 Notes: At its option, the Company may redeem the 2030 Notes, in whole or in part, at any time or from time to time prior to their stated maturity. The redemption price for 2030 Notes that are redeemed before March 18, 2030 will be equal to the greater of (a) 100% of the principal amount of the 2030 Notes to be redeemed and (b) a “make-whole” amount described elsewhere in this prospectus, plus in either case accrued and unpaid interest to, but not including, the redemption date. On or after March 18, 2030, we may redeem the 2030 Notes, in whole or in part, at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest to, but not including, the redemption date.

 

  See “Description of Notes—Optional Redemption.”

 

Redemption for Tax Reasons

All payments under or with respect to the Notes will be made without withholding or deduction for any taxes or other governmental charges, except to the extent required by law. If withholding or deduction is required by law, and such requirement cannot be avoided by taking available reasonable measures, provided that changing the jurisdiction of incorporation of Sands China or any subsidiary shall not be considered a reasonable measure, we will pay additional amounts so that the net amount received is no less than the amount that would have been received in the absence of such withholding or deduction. See “Description of Notes—Additional Amounts.” We may redeem the Notes in whole, but not in part, at any time, upon giving prior notice, if certain changes in tax law impose certain withholding taxes on amounts payable on the Notes, and, as a result, we are required to pay additional amounts with respect to such withholding taxes. If we exercise such redemption right, we must pay you a price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest and additional amounts, if any, to but not including the date of redemption. See “Description of Notes—Redemption for Tax Reasons.”

 

Change of Control

If we experience a Change of Control Triggering Event (as defined under “Description of Notes—Definitions”), we will be required to offer to repurchase the Notes at 101% of their principal amount plus accrued and unpaid interest, if any, to but not including the date of such repurchase. See “Description of Notes—Repurchase at the Option of Holders Upon a Change of Control Triggering Event.”


 

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Investor Put Option

Upon the occurrence of any event resulting from any change in Gaming Law (as defined under “Description of Notes—Definitions”) or any action by a Gaming Authority (as defined under “Description of Notes—Definitions”) after which none of the Company or any of its subsidiaries owns or manages casino or gaming areas or operates casino games of fortune and chance in Macao in substantially the same manner as they are owning or managing casino or gaming areas or operating casino games as of the issue date, for a period of thirty consecutive days or more, and such event has a material adverse effect on the financial condition, business, properties, or results of operations of the Company and its subsidiaries, taken as a whole, each holder of the Notes will have the right to require the Company to repurchase all or any part of such holder’s Notes at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, and additional amounts, if any, to but excluding the date of repurchase. See “Description of Notes—Repurchase at the Option of Holders—Investor Put Option.”

 

Certain Covenants

The Indenture will partially limit, among other things, our ability to merge or consolidate with another company and require us to provide certain information to the holders of Notes.

 

  These covenants are subject to a number of important exceptions and qualifications. See “Description of Notes—Certain Covenants” and the related definitions.

 

Listing

Application will be made for the listing of the Notes on the Hong Kong Stock Exchange by way of debt issues to Professional Investors only. We cannot assure you that we will obtain or be able to maintain a listing of the Notes on the Hong Kong Stock Exchange.

 

Form, Denomination and Registration

The Notes will be issued only in fully registered form, without coupons, in minimum denominations of US$200,000 of principal amount and integral multiples of US$1,000 in excess thereof and will be initially represented by one or more global notes registered in the name of a nominee of DTC.

 

Book-Entry Only

The Notes will be issued in book-entry form through the facilities of Cede & Co. as nominee of DTC for the accounts of its participants, including Euroclear and Clearstream, Luxembourg. For a description of certain factors relating to clearance and settlement, see “Description of Notes—Book-Entry, Delivery and Form.”

 

Security Codes

 

 

  

2026 Notes

  CUSIP   
  ISIN   
 

 

  

2030 Notes

  CUSIP   
  ISIN   


 

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Trustee for the Notes

U.S. Bank National Association.

 

Registrar, Transfer Agent and Principal Paying Agent

U.S. Bank National Association.

 

Use of Proceeds

We will not receive any proceeds from the issue of the Notes in the exchange offer. For a description of the use of proceeds from the offering of the Outstanding Notes, see “Use of Proceeds.”

 

Governing Law of the Notes and the Indenture

The Indenture is, and the Notes will be, governed by and construed in accordance with the laws of the State of New York.

 

Risk Factors

Investing in the Notes involves substantial risks. Please see the “Risk Factors” section for a description of certain of the risks you should carefully consider before investing in the Notes.


 

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RISK FACTORS

You should carefully consider the risks described below and the other information contained in this prospectus before making an investment decision. The risks and uncertainties described below may not be the only ones that we face. Additional risks and uncertainties that we are not aware of or that we currently believe are immaterial may also adversely affect our business, financial condition or results of operations. If any of the events described below should occur, our business, financial condition or results of operations could be materially and adversely affected. In such case, we may not be able to satisfy our obligations under the Notes, and you could lose all or part of your investment.

Risks Related to Our Business

The COVID-19 Pandemic has adversely affected the number of visitors to our facilities and disrupted our operations, resulting in lower revenues and cash flows. This adverse impact is anticipated to continue until the global COVID-19 Pandemic is contained.

The impact of the COVID-19 Pandemic and measures to prevent its spread are expected to continue to impact our results, operations, cash flows and liquidity.

We expect the impact of these disruptions, including the extent of their adverse impact on our financial and operational results, will be dictated by the length of time that such disruptions continue. Although all our properties are currently open, we cannot predict whether future closures would be appropriate or could be mandated. Even once travel advisories and restrictions are modified or cease to be necessary, demand for integrated resorts may remain weak for a significant length of time and we cannot predict if or when the gaming and non-gaming activities of our properties will return to pre-outbreak levels of volume or pricing. In particular, future demand for integrated resorts may be negatively impacted by the adverse changes in the perceived or actual economic climate, including higher unemployment rates, declines in income levels and loss of personal wealth or reduced business spending for MICE resulting from the impact of the COVID-19 Pandemic. In addition, we cannot predict the impact the COVID-19 Pandemic will have on our mall tenants.

We are a holding company with limited business operations of our own. Our main assets consist of our direct and indirect shareholdings in our operating subsidiaries through which we conduct most of our business operations. If the global response to contain COVID-19 escalates, or is unsuccessful, our subsidiaries’ ability to generate sufficient earnings and cash flow to pay dividends or distributions in the future will be negatively impacted.

Our businesses would also be impacted should the disruptions from the COVID-19 Pandemic lead to prolonged changes in consumer behavior or could impact our current construction projects in Macao. There are certain limitations on our ability to mitigate the adverse financial impact of these matters, such as the fixed costs at our properties, the access to construction labor due to immigration restrictions or construction materials due to vendor supply chain delays. The COVID-19 Pandemic also makes it more challenging for management to estimate the future performance of our businesses, particularly over the near to medium term. Any of these events may continue to disrupt our ability to staff our business adequately, could continue to generally disrupt our operations or construction projects and if the global response to contain the COVID-19 Pandemic escalates or is unsuccessful, would have a material adverse effect on our business, financial condition, results of operations and cash flows.

If we are required to raise additional capital in the future, our access to and cost of financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, our prospects and our credit ratings. If our credit ratings were to be downgraded, or general market conditions were to ascribe higher risk to our rating levels, our industry, or us, our access to capital and the cost of any debt financing would be further negatively impacted. In addition, the terms of future

 

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debt agreements could include more restrictive covenants, or require incremental collateral, which may further restrict our business operations or be unavailable due to our covenant restrictions then in effect. There is no guarantee that debt financings will be available in the future to fund our obligations, or that they will be available on terms consistent with our expectations. We have entered into a waiver and amendment request letter with our lenders to waive certain of the financial requirements through July 1, 2021 and was further amended to extend the waiver period through January 1, 2022. While we currently anticipate we will continue to be in compliance with the financial requirements under our 2018 SCL Credit Facility, we cannot assure you that the impact of the COVID-19 Pandemic will not cause us to no longer be able to comply with the financial covenants, nor can we assure you that we would be able to obtain waivers from our lenders.

The COVID-19 Pandemic has had, and will continue to have, an adverse effect on our results of operations. Given the uncertainty around the extent and timing of the potential future spread or mitigation of the COVID-19 Pandemic and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact on our future results of operations, cash flows or financial condition.

The Macao government could grant additional rights to conduct gaming in the future.

We hold a subconcession under one of only six gaming concessions and subconcessions authorized by the Macao government to operate casinos in Macao through June 26, 2022. If the Macao government were to allow additional gaming operators in Macao, we would face additional competition, which could have a material adverse effect on our financial condition, results of operations and cash flows.

Our business is particularly sensitive to reductions in discretionary consumer and corporate spending as a result of downturns in the economy.

Consumer demand for hotel/casino resorts, trade shows and conventions and for the type of luxury amenities we offer is particularly sensitive to downturns in the economy and the corresponding impact on discretionary spending. Changes in discretionary consumer spending or corporate spending on conventions and business travel could be driven by many factors, such as: perceived or actual general economic conditions; fear of exposure to a widespread health epidemic, such as the COVID-19 Pandemic; any weaknesses in the job or housing market; credit market disruptions; high energy, fuel and food costs; the increased cost of travel; the potential for bank failures; perceived or actual disposable consumer income and wealth; fears of recession and changes in consumer confidence in the economy; or fear of war, political instability, civil unrest or future acts of terrorism. These factors could reduce consumer and corporate demand for the luxury amenities and leisure and business activities we offer, thus imposing additional limits on pricing and harming our operations.

The number of visitors to Macao, particularly visitors from mainland China, may decline or travel to Macao may be disrupted.

Our VIP and mass market gaming customers typically come from nearby destinations in Asia, including mainland China, Hong Kong, South Korea and Japan. Increasingly, a significant number of gaming customers come to our casinos from mainland China. Any slowdown in economic growth or changes of China’s current restrictions on travel and currency movements could further disrupt the number of visitors from mainland China to our properties as well as the amounts they are willing and able to spend while at our properties.

As a result of the COVID-19 Pandemic and related travel restrictions put in place, total visitation from mainland China to Macao on a monthly basis decreased by 14.9% (with an 83.3% decrease in visitation over the first seven days of Chinese New Year Holiday) in January 2020 and decreased in a range of 96.3% to 99.6% in February to June 2020, as compared to the same periods in 2019.

Policies and measures adopted from time to time by the Chinese government include restrictions imposed on exit visas granted to residents of mainland China for travel to Macao and Hong Kong. These measures have, and any future policy developments implemented may have, the effect of reducing the number of visitors to Macao from mainland China, which could adversely impact tourism and the gaming industry in Macao.

 

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Our operations face intense competition.

The hotel, resort and casino businesses are highly competitive. Our operations currently compete with numerous other casinos located in Macao. Additional Macao facilities announced by our competitors and the increasing capacity of hotel rooms in Macao could add to the competitive dynamic of the market.

Our operations will also compete to some extent with casinos located elsewhere in Asia, including Singapore, South Korea, Malaysia, Philippines, Australia, Cambodia and elsewhere in the world, including Las Vegas, as well as online gaming and cruise ships that offer gaming. Our operations also face increased competition from new developments in Malaysia, Australia and South Korea. In addition, certain countries have legalized, and others may in the future legalize, casino gaming, including Japan, Taiwan, Thailand and Vietnam.

The proliferation of gaming venues, especially in Southeast Asia, could have a material adverse effect on our financial condition, results of operations and cash flows.

Our business could be adversely affected by the limitations of the pataca exchange markets and restrictions on the export of the Renminbi.

Our revenues in Macao are denominated in patacas, the legal currency of Macao, and Hong Kong dollars. The Macao pataca is pegged to the Hong Kong dollar within a narrow range and, in many cases, is used interchangeably with the Hong Kong dollar in Macao. The Hong Kong dollar is pegged to the U.S. dollar. Although currently permitted, we cannot assure you patacas will continue to be freely exchangeable into U.S. dollars. Also, our ability to convert large amounts of patacas into U.S. dollars over a relatively short period may be limited.

We are currently prohibited from accepting wagers in Renminbi, the legal currency of China. There are also restrictions on the remittance of the Renminbi from mainland China and the amount of Renminbi that can be converted into foreign currencies, including the pataca and Hong Kong dollar. Restrictions on the remittance of the Renminbi from mainland China may impede the flow of gaming customers from mainland China to Macao, inhibit the growth of gaming in Macao and negatively impact our gaming operations. There is no assurance that incremental mainland Chinese regulations will not be promulgated in the future that have the effect of restricting or eliminating the remittance of Renminbi from mainland China. Further, if any new mainland Chinese regulations are promulgated in the future that have the effect of permitting or restricting (as the case may be) the remittance of Renminbi from mainland China, then such remittances will need to be made subject to the specific requirements or restrictions set out in such rules.

Conducting business in Macao has certain political and economic risks.

Our business development plans, financial condition, results of operations and cash flows may be materially and adversely affected by significant political, social and economic developments in Macao, and by changes in policies of the government or changes in laws and regulations or their interpretations. Our operations in Macao are also exposed to the risk of changes in laws and policies that govern operations of companies based in Macao. Jurisdictional tax laws and regulations may also be subject to amendment or different interpretation and implementation, thereby having an adverse effect on our profitability after tax. These changes may have a material adverse effect on our financial condition, results of operations and cash flows.

Current Macao laws and regulations concerning gaming and gaming concessions and licenses are, for the most part, relatively recent and there is little precedent on the interpretation of these laws and regulations. We believe our organizational structure and operations are in compliance in all material respects with all applicable laws and regulations of Macao. These laws and regulations are complex and a court or an administrative or regulatory body may in the future render an interpretation of these laws and regulations, or issue regulations, which differs from our interpretation and could have a material adverse effect on our financial condition, results of operations and cash flows.

 

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In addition, our activities in Macao are subject to administrative review and approval by various government agencies. We cannot assure you we will be able to obtain all necessary approvals, which may have a material adverse effect on our long-term business strategy and operations. Macao laws permit redress to the courts with respect to administrative actions; however, such redress is largely untested in relation to gaming issues.

On October 6, 2014, the Macao government approved smoking control legislation, which prohibits smoking in casinos. This legislation, as amended on July 14, 2017 and effective as of January 1, 2018, permits casinos to maintain designated smoking rooms opened to the public, as long as such rooms comply with certain conditions, including no gaming equipment is installed within a three-meter radius from their entrance doors, they are physically separated from the remaining areas and no activity other than smoking is conducted inside the rooms, including gaming. Such legislation may deter potential gaming customers who are smokers from frequenting casinos in jurisdictions with smoking bans such as Macao. Such laws and regulations could change or could be interpreted differently in the future. We cannot predict the future likelihood or outcome of similar legislation or referendums in other jurisdictions where we operate or the magnitude of any decrease in revenues as a result of such regulations, though any smoking ban could have an adverse effect on our business, financial condition, results of operations and cash flows.

Our business is sensitive to the willingness of our customers to travel. Infectious diseases, acts of terrorism, regional political events and developments in the conflicts in certain countries could cause severe disruptions in air and other forms of travel that reduce the number of visitors to our facilities.

We are dependent on the willingness of our customers to travel. Only a small amount of our business is and will be generated by local residents. Most of our customers travel to reach our properties. Infectious diseases may severely disrupt domestic and international travel, which would result in a decrease in customer visits to Macao, including our properties. Regional political events, acts of terrorism or civil unrest, including those resulting in travelers perceiving areas as unstable or an unwillingness of governments to grant visas, regional conflicts or an outbreak of hostilities or war, or an outbreak of infectious diseases such as the COVID-19 Pandemic could have a similar effect on domestic and international travel. Management cannot predict the extent to which disruptions in air or other forms of travel as a result of infectious disease outbreaks, any further terrorist acts, regional political events, regional conflicts or outbreak of hostilities or war would have a material adverse effect on our business, financial condition, results of operations and cash flows.

The failure to maintain the integrity of our information and information systems or comply with applicable privacy and data security requirements and regulations could harm our reputation and adversely affect our business.

Our business requires the collection and retention of large volumes of data and non-electronic information, including credit card numbers and other information in various information systems we maintain and in those maintained by third parties with whom we contract and may share data. We also maintain internal information about our employees and information relating to our operations. The integrity and protection of that information are important to us. Our collection of such information is subject to extensive private and governmental regulation.

Privacy and cybersecurity laws and regulations are developing and changing frequently, and vary significantly by jurisdiction. We may incur significant costs in our efforts to comply with the various applicable privacy and cybersecurity laws and regulations as they emerge and change. Compliance with applicable privacy laws and regulations also may adversely impact our ability to market our products, properties, and services to our guests and patrons. Non-compliance by us, or potentially by third parties with which we share information, with any applicable privacy and cybersecurity law or regulation, including accidental loss, inadvertent disclosure, unauthorized access or dissemination, or breach of security may result in damage to our reputation and could subject us to fines, penalties, required corrective actions, lawsuits, payment of damages, or restrictions on our use or transfer of data.

 

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In addition, LVS, our parent company, has experienced a sophisticated criminal cybersecurity attack in the past and may experience with more frequency global cybersecurity and information security threats, which may range from uncoordinated individual attempts to sophisticated and targeted measures directed at us (as subsidiaries of LVS). There has been an increase in criminal cybersecurity attacks against companies where customer and company information has been compromised and company data has been destroyed. Our information systems and records, including those we maintain with third-party service providers, may be subject to cyber-attacks and information security breaches. Cyber-attacks and information security breaches may include attempts to access information, computer malware such as viruses, denial of service, ransomware attacks that encrypt, exfiltrate, or otherwise render data unusable or unavailable in an effort to extort money or other consideration as a condition to purportedly returning the data to a usable form, operator errors or misuse, or inadvertent releases of data or documents, and other forms of electronic and non-electronic information security breaches.

Our data security measures are reviewed regularly and we rely on proprietary and commercially available systems, software, tools, and monitoring to provide security for processing, transmission, and storage of customer and employee information. We also rely extensively on computer systems to process transactions, maintain information, and manage our businesses. Our third-party information system service providers and other third parties that share data with us pursuant to contractual agreements also face risks relating to cybersecurity and privacy, and we do not directly control any of such parties’ information security or privacy operations. For example, the systems currently used for the transmission and approval of payment card transactions, and the technology utilized in payment cards themselves, are determined and controlled by the payment card industry, not us. Our gaming operations rely heavily on technology services provided by third parties. In the event there is an interruption of these services to us, it may have an adverse effect on our operations and financial condition. Disruptions in the availability of our computer systems, or those of third parties we engage to provide gaming operating systems for the facilities we operate, through cybersecurity attacks or otherwise, could impact our ability to service our customers and adversely affect our sales and results of operations.

A significant theft, destruction, loss or fraudulent use of information maintained by us or by a third-party service provider could have an adverse effect on our reputation, cause a material disruption to our operations and management team and result in remediation expenses (including liability for stolen assets or information, repairing system damage and offering incentives to customers or business partners to maintain their relationships after an attack) and regulatory fines, penalties and corrective actions, or lawsuits by regulators, third-party service providers, third parties that share data with us pursuant to contractual agreements and/or people whose data is or may be impacted. Such theft, destruction, loss or fraudulent use could also result in litigation by stockholders. Advances in computer software capabilities and encryption technology, new tools, and other developments, including continuously evolving attack methods that may exploit vulnerabilities based on these advances, may increase the risk of a security breach or other intrusion. In addition, we may incur increased cybersecurity and privacy protection costs that may include organizational changes, deploying additional personnel and protection technologies, training employees and engaging third-party experts and consultants. There can be no assurance the insurance the Company has in place relating to cybersecurity and privacy risks will be sufficient in the event of a major cybersecurity or privacy event. Any of these events could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are subject to extensive regulation and the cost of compliance or failure to comply with such regulations.

We are required to obtain and maintain licenses from various jurisdictions in order to operate certain aspects of our business, and we are subject to extensive background investigations and suitability standards in our gaming business. We also will become subject to regulation in any other jurisdiction where we choose to operate in the future. There can be no assurance we will be able to obtain new licenses or renew any of our existing licenses, or if such licenses are obtained, such licenses will not be conditioned, suspended or revoked; and the

 

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loss, denial or non-renewal of any of our licenses could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are a subsidiary of LVS and are therefore subject to certain Nevada gaming laws, which apply to our gaming activities and associations in jurisdictions outside the State of Nevada. We are required to comply with certain reporting requirements concerning our current and proposed gaming activities and associations occurring outside the State of Nevada, including Macao. Also, as we are required to provide any other information the Nevada Commission may require concerning our gaming activities and associations in jurisdictions outside the State of Nevada, we could be subject to disciplinary action by the Nevada Commission if our current reporting is determined to be unsatisfactory due to Macao regulations regarding personal data protection prohibiting us from satisfying certain reporting requirements of the Nevada Commission.

We are also subject to regulations imposed by the FCPA, which generally prohibits U.S. companies (such as LVS, of which we are a subsidiary) and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business. LVS entered into a comprehensive civil administrative settlement with the SEC on April 7, 2016, and a non-prosecution agreement with the DOJ on January 19, 2017, which resolved all inquiries related to these government investigations and included on-going reporting obligations to the DOJ through January 2020. Any violation of the FCPA could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We also deal with significant amounts of cash in our operations and are subject to various reporting and anti-money laundering regulations. Recently, various governmental authorities have evidenced an increased focus on the gaming industry and compliance with anti-money laundering laws and regulations. For instance, we are subject to regulation which, among other things, requires us to report to various governmental authorities certain currency transactions in excess of applicable thresholds and certain suspicious activities where we know, suspect or have reason to suspect such transactions involve funds from illegal activity or are intended to violate certain law or regulations or are designed to evade reporting requirements or have no business or lawful purpose. In addition, we are subject to various other rules and regulations involving reporting, recordkeeping and retention. Our compliance with these requirements is subject to periodic audits, and we may be subject to substantial civil and criminal penalties, including fines, if we fail to comply with applicable regulations. We are also subject to regulations set forth by the gaming authorities in the areas in which we operate. Any such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted. Any violation of anti-money laundering laws or regulations, or any accusations of money laundering or regulatory investigations into possible money laundering activities, by any of our properties, employees or customers could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are currently not required to pay corporate income taxes on our casino gaming operations in Macao due to an exemption granted by the Macao government. Additionally, we currently have an agreement with the Macao government providing a fixed annual payment as a substitution for a 12% tax otherwise due from VML’s shareholders on dividends distributed from our gaming operations. These tax arrangements expire on June 26, 2022.

We have had the benefit of a corporate tax exemption in Macao, which exempts us from paying the 12% corporate income tax on profits generated by the operation of casino games, but does not apply to our non-gaming activities. We will continue to benefit from this tax exemption through June 26, 2022, the date our subconcession agreement expires. Additionally, we entered into an agreement with the Macao government in April 2019, effective through June 26, 2022, providing an annual payment as a substitution for a 12% tax otherwise due from VML shareholders on dividend distributions paid from VML gaming profits. We intend to request extensions of these tax arrangements; however, there is no certainty either of these tax arrangements will be extended beyond their expiration dates.

 

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We will stop generating any gaming revenues from our operations if we cannot secure an extension of our subconcession in 2022 or if the Macao government exercises its redemption right.

Our subconcession agreement expires on June 26, 2022. Unless our subconcession is extended, all of VML’s casino premises and gaming-related equipment will be transferred automatically to the Macao government on that date without compensation to us and we will cease to generate gaming revenues from these operations. Beginning on December 26, 2017, the Macao government may redeem the subconcession agreement by providing us at least one-year prior notice. In the event the Macao government exercises this redemption right, we are entitled to fair compensation or indemnity. The amount of this compensation or indemnity will be determined based on the amount of gaming and non-gaming revenue generated by The Venetian Macao during the tax year prior to the redemption multiplied by the number of remaining years before expiration of the subconcession. We cannot assure you we will be able to renew or extend our subconcession agreement on terms favorable to us or at all. We also cannot assure you if our subconcession is redeemed, the compensation paid will be adequate to compensate us for the loss of future revenues.

Our subconcession can be terminated under certain circumstances without compensation to us.

The Macao government has the right, after consultation with Galaxy Casino Company Limited, to unilaterally terminate our subconcession in the event of VML’s serious non-compliance with its basic obligations under the subconcession and applicable Macao laws. Upon termination of our subconcession, our casinos and gaming-related equipment would automatically be transferred to the Macao government without compensation to us and we would cease to generate any revenues from these operations. The loss of our subconcession would prohibit us from conducting gaming operations in Macao, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are dependent upon gaming promoters for a portion of our gaming revenues in Macao.

Gaming promoters, which promote gaming and draw VIP patrons to casinos, are responsible for a portion of our gaming revenues in Macao. With the increased number of gaming facilities in Macao, the competition for relationships with gaming promoters has increased. There can be no assurance we will be able to maintain, or grow, our relationships with gaming promoters. If we are unable to maintain or grow our relationships with gaming promoters, or if the gaming promoters experience financial difficulties or are unable to develop or maintain relationships with our VIP patrons, our ability to grow our gaming revenues will be hampered.

If gaming promoters attempt to negotiate changes to our operational agreements, including higher commissions, it could result in higher costs for us, loss of business to a competitor or loss of relationships with gaming promoters. Given regulatory requirements and certain economic and other factors occurring in the region, gaming promoters may encounter difficulties in attracting patrons to come to Macao, resulting in decreased gaming volume at our Macao properties. Credit already extended by gaming promoters to their patrons may become increasingly difficult for them to collect. This inability to attract sufficient patrons, grant credit and collect amounts due in a timely manner could negatively affect gaming promoters’ activities, cause gaming promoters to wind up or liquidate their operations or result in gaming promoters leaving Macao. The above factors affecting gaming promoters could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, the quality of gaming promoters with whom we have relationships is important to our reputation and our ability to continue to operate in compliance with our gaming license. While we strive for excellence in our associations with gaming promoters, we cannot assure you the gaming promoters with whom we are associated will meet the high standards we insist upon. If a gaming promoter falls below our standards, we may suffer reputational harm, as well as worsening relationships with, and possible sanctions from, gaming regulators with authority over our operations. In the event a gaming promoter does not meet its financial obligations, there can be no assurance we may not incur financial exposure.

 

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We extend credit to a large portion of our customers and we may not be able to collect gaming receivables from our credit players.

We conduct our gaming activities on a credit and cash basis. Any such credit we extend is unsecured. Table games players typically are extended more credit than slot players, and high-stakes players typically are extended more credit than players who tend to wager lesser amounts. High-end gaming is more volatile than other forms of gaming, and variances in win-loss results attributable to high-end gaming may have a significant positive or negative impact on cash flow and earnings in a particular quarter.

During the year ended December 31, 2019, approximately 14.7% of our table games play was from credit-based wagering. We extend credit to those customers whose level of play and financial resources warrant, in the opinion of management, an extension of credit. These large receivables could have a significant impact on our results of operations if deemed uncollectible.

In particular, we expect our operations will be able to enforce gaming debts only in a limited number of jurisdictions, including Macao. To the extent our Macao gaming customers and gaming promoters are from other jurisdictions, our operations may not have access to a forum in which it will be possible to collect all gaming receivables because, among other reasons, courts of many jurisdictions do not enforce gaming debts and our operations may encounter forums that will refuse to enforce such debts. Moreover, under applicable law, our operations remain obligated to pay taxes on uncollectible winnings from customers.

Even where gaming debts are enforceable, they may not be collectible. Our inability to collect gaming debts could have a significant adverse effect on our results of operations and cash flows.

We face the risk of fraud and cheating.

Our gaming customers may attempt or commit fraud or cheat in order to increase winnings. Acts of fraud or cheating could involve the use of counterfeit chips or other tactics, possibly in collusion with our employees. Internal acts of cheating could also be conducted by employees through collusion with dealers, surveillance staff, floor managers or other casino or gaming area staff. Failure to discover such acts or schemes in a timely manner could result in losses in our gaming operations. In addition, negative publicity related to such schemes could have an adverse effect on our reputation, potentially causing a material adverse effect on our business, financial condition, results of operations and cash flows.

We depend on the continued services of key managers and employees. If we do not retain our key personnel or attract and retain other highly skilled employees, our business will suffer.

Our ability to maintain our competitive position is dependent to a large degree on the services of our senior management team, including Mr. Sheldon Gary Adelson, Dr. Wong Ying Wai (Wilfred), Mr. Chum Kwan Lock (Grant), Mr. Sun MinQi (Dave) and Mr. Dylan James Williams. The loss of their services or the services of our other senior managers, or the inability to attract and retain additional senior management personnel could have a material adverse effect on our business.

We compete for limited management and labor resources in Macao, and policies of governments may also affect our ability to employ imported managers or labor.

Our success depends in large part upon our ability to attract, retain, train, manage and motivate skilled managers and employees at our properties. The Macao government requires we only hire Macao residents in our casinos for certain employee roles, such as dealers. In addition, we are required to obtain visas and work permits for managers and employees we seek to employ from other countries. There is significant competition for managers and employees with the skills required to perform the services we offer and competition for these individuals in Macao is likely to increase as other competitors expand their operations.

 

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We may have to recruit managers and employees from other countries to adequately staff and manage our properties and certain Macao government policies affect our ability to hire non-resident managers and employees in certain job classifications. Despite our coordination with the Macao labor and immigration authorities to ensure our management and labor needs are satisfied, we may not be able to recruit and retain a sufficient number of qualified managers or employees for our operations or the Macao labor and immigration authorities may not grant us the necessary visas or work permits.

If we are unable to obtain, attract, retain and train skilled managers and employees, and obtain any required visas or work permits for our skilled managers and employees, our ability to adequately manage and staff our existing properties and planned development projects could be impaired, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The transportation infrastructure in Macao may not be adequate to accommodate increased future demand of visitors to Macao.

Macao is in the process of expanding its transportation infrastructure to service the increased number of visitors to Macao. If the planned expansions of transportation facilities to and from Macao are delayed or not completed, and Macao’s transportation infrastructure is insufficient to meet the demands of an increased volume of visitors to Macao, the desirability of Macao as a business and leisure tourism destination, as well as the results of operations of our Macao properties, could be negatively impacted.

Natural or man-made disasters, an outbreak of highly infectious or contagious disease, political instability, civil unrest, terrorist activity or war could adversely affect the number of visitors to our facilities and disrupt our operations, resulting in a material adverse effect on our business, financial condition, results of operations and cash flows.

So called “Acts of God,” such as typhoons and rainstorms, particularly in Macao, and other natural disasters, man-made disasters, outbreaks of highly infectious or contagious diseases, political instability, civil unrest, terrorist activity or war may result in decreases in travel to and from, and economic activity in, areas in which we operate, and may adversely affect the number of visitors to our properties. Any of these events may disrupt our ability to staff our business adequately, could generally disrupt our operations and specifically, if the global response to contain the COVID-19 Pandemic escalates or is unsuccessful, would have a material adverse effect on our business, financial condition, results of operations and cash flows. Although we have insurance coverage with respect to some of these events, we cannot assure you any such coverage will provide any coverage or be sufficient to indemnify us fully against all direct and indirect costs, including any loss of business that could result from substantial damage to, or partial or complete destruction of, any of our properties.

VML may have financial and other obligations to foreign workers managed by its contractors under government labor quotas.

Between April and August 2020, the Macao government has granted VML more than 2,000 quotas to permit it to hire foreign workers. VML has effectively assigned the management of these quotas to its contractors for the construction of our Cotai Strip projects. VML, however, remains ultimately liable for all employer obligations relating to these employees, including for payment of wages and taxes and compliance with labor and workers’ compensation laws. VML requires each contractor to whom it has assigned the management of part of its labor quotas to indemnify VML for any costs or liabilities VML incurs as a result of such contractor’s failure to fulfill employer obligations. VML’s agreements with its contractors also contain provisions that permit it to retain some payments for up to one year after the contractors’ complete work on the projects. We cannot assure you VML’s contractors will fulfill their obligations to employees hired under the labor quotas or to VML under the indemnification agreements, or the amount of any indemnification payments received will be sufficient to pay for any obligations VML may owe to employees managed by contractors under VML’s quotas. Until we make final payments to our contractors, we have offset rights to collect amounts they may owe us, including amounts owed

 

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under the indemnities relating to employer obligations. After we have made the final payments, it may be more difficult for us to enforce any unpaid indemnity obligations.

There are significant risks associated with our construction projects.

We previously announced the renovation, expansion and rebranding of the Sands Cotai Central into The Londoner Macao and the addition of approximately 370 luxury suites in the Londoner Court. These development projects and any other construction projects we undertake will entail significant risks. Construction activity requires us to obtain qualified contractors and subcontractors, the availability of which may be uncertain. Construction projects are subject to cost overruns and delays caused by events outside of our control or, in certain cases, our contractors’ control, such as shortages of materials or skilled labor, unforeseen engineering, environmental and/or geological problems, work stoppages, weather interference, unanticipated cost increases and unavailability of construction materials or equipment. Construction, equipment or staffing problems or difficulties in obtaining any of the requisite materials, licenses, permits, allocations and authorizations from governmental or regulatory authorities could increase the total cost, delay, jeopardize, prevent the construction or opening of our projects, or otherwise affect the design and features. Construction contractors or counterparties for our current projects may be required to bear certain cost overruns for which they are contractually liable, and if such counterparties are unable to meet their obligations, we may incur increased costs for such developments. If our management is unable to manage successfully our worldwide construction projects, it could have a material adverse effect on our financial condition, results of operations and cash flows.

The anticipated costs and completion dates for our current projects are based on budgets, designs, development and construction documents. Schedule estimates are prepared with the assistance of architects and other construction development consultants and are subject to change as the design, development and construction documents are finalized and as actual construction work is performed. In addition, we are managing certain impacts associated with the COVID-19 Pandemic, which include ensuring skilled labor, construction materials, licenses and permits are available when needed. The duration and intensity of the COVID-19 Pandemic could impact the budget and timeline of our current projects. A failure to complete our projects on budget or on schedule may have a material adverse effect on our financial condition, results of operations and cash flows.

Our debt instruments, current debt service obligations and substantial indebtedness may restrict our current and future operations, particularly our ability to timely refinance existing indebtedness, finance additional growth, respond to changes or take some actions that may otherwise be in our best interests.

Our current debt service obligations contain, or any future debt service obligations and instruments may contain, various covenants, including restrictions on our ability to:

 

   

incur additional debt, including providing guarantees or credit support;

 

   

incur liens securing indebtedness or other obligations;

 

   

dispose of certain assets;

 

   

make certain acquisitions;

 

   

pay dividends or make distributions and make other restricted payments, such as purchasing equity interests, repurchasing junior indebtedness or making investments in third parties;

 

   

enter into sale and leaseback transactions;

 

   

engage in any new businesses;

 

   

issue preferred stock; and

 

   

enter into transactions with our stockholders and our affiliates.

 

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The 2018 SCL Credit Facility contains various financial covenants. As a result of the impact from the COVID-19 Pandemic, the 2018 SCL Credit Facility was amended on March 27, 2020 to waive those financial covenants through July 1, 2021 and on September 11, 2020, the 2018 SCL Credit Facility was further amended to extend the waiver period through January 1, 2022. We cannot assure you that we will be able to obtain similar waivers in the future.

As of June 30, 2020, we had US$7.0 billion of borrowings outstanding under the Senior Notes and US$2.02 billion of available borrowing capacity under the 2018 SCL Revolving Facility. On September 11, 2020, the 2018 SCL Credit Facility was amended to provide us with the option to increase the total available borrowing capacity by an additional US$1 billion. This indebtedness could have important consequences to us. For example, it could:

 

   

make it more difficult for us to satisfy our debt service obligations;

 

   

increase our vulnerability to general adverse economic and industry conditions, such as the impact of the COVID-19 Pandemic;

 

   

impair our ability to obtain additional financing in the future for working capital needs, capital expenditures, development projects, acquisitions or general corporate purposes;

 

   

require us to dedicate a significant portion of our cash flow from operations to the payment of principal and interest on our debt, which would reduce the funds available for our operations and development projects;

 

   

limit our flexibility in planning for, or reacting to, changes in the business and the industry in which we operate;

 

   

require us to repurchase our Senior Notes upon certain events, such as any change in gaming law or any action by a gaming authority after which none of the Group members owns or manages casino or gaming areas or operates casino games of fortune and chance in Macao in substantially the same matter as the Group was at the issue date of the Senior Notes for a period of 30 consecutive days or more;

 

   

place us at a competitive disadvantage compared to our competitors that have less debt; and

 

   

subject us to higher interest expense in the event of increases in interest rates.

Our ability to timely refinance and replace our indebtedness in the future will depend upon general economic and credit market conditions, approval required by local government regulators, adequate liquidity in the global credit markets, the particular circumstances of the gaming industry, such as the ultimate duration and impact of the COVID-19 Pandemic, and prevalent regulations and our cash flow and operations, in each case as evaluated at the time of such potential refinancing or replacement. If we are unable to refinance or generate sufficient cash flow from operations to repay our indebtedness on a timely basis, we might be forced to seek alternate forms of financing, dispose of certain assets or minimize capital expenditures and other investments, or reduce dividend payments. There is no assurance any of these alternatives would be available to us, if at all, on satisfactory terms, on terms that would not be disadvantageous to us, or on terms that would not require us to breach the terms and conditions of our existing or future debt agreements.

We may attempt to arrange additional financing to fund the remainder of our planned, and any future, development projects. If such additional financing is necessary, we cannot assure you we will be able to obtain all the financing required for the construction and opening of these projects on suitable terms, if at all.

Our insurance coverage may not be adequate to cover all possible losses our properties could suffer. In addition, our insurance costs may increase and we may not be able to obtain the same insurance coverage, or the scope of insurance coverage we deem necessary, in the future.

We have comprehensive property and liability insurance policies for our properties in operation, as well as those in the course of construction, with coverage features and insured limits we believe are customary in their

 

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breadth and scope. Market forces beyond our control may nonetheless limit the scope of the insurance coverage we can obtain or our ability to obtain coverage at reasonable rates. Certain types of losses, generally of a pandemic or catastrophic nature, such as infectious disease similar to the COVID-19 Pandemic, earthquakes, typhoons and floods, or terrorist acts, or certain liabilities may be, or are, uninsurable or too expensive to justify obtaining insurance. As a result, we may not be successful in obtaining insurance without increases in cost or decreases in coverage levels. In addition, in the event of a substantial loss, the insurance coverage we carry may not be sufficient to pay the full market value or replacement cost of our lost investment or in some cases could result in certain losses being totally uninsured. As a result, we could lose some or all of the capital we have invested in a property, as well as the anticipated future revenue from the property, and we could remain obligated for debt or other financial obligations related to the property.

Certain of our debt instruments and other material agreements require us to maintain a certain level of insurance. Failure to satisfy these requirements could result in an event of default under these debt instruments or material agreements.

Risks Related to the Exchange Offer

If you choose not to exchange your Outstanding Notes, the present transfer restrictions will remain in force and the market price of your Outstanding Notes could decline.

If you do not exchange your Outstanding Notes for Notes under the exchange offer, then you will continue to be subject to the transfer restrictions on the Outstanding Notes as set forth in the final offering memorandum distributed in connection with the private offering of the Outstanding Notes. In general, the Outstanding Notes may not be offered or sold unless they are registered or exempt from registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the Outstanding Notes under the Securities Act. You should refer to the section of the prospectus entitled “The Exchange Offer” for information about how to tender your Outstanding Notes.

The tender of Outstanding Notes under the exchange offer will reduce the principal amount of the Outstanding Notes, which may have an adverse effect upon, and increase the volatility of, the market price of the Outstanding Notes due to reduction in liquidity.

As a result of our consummation of the exchange offer, holders of the Outstanding Notes who do not tender their Outstanding Notes will generally have no further rights under the registration rights agreement, including registration rights and the right to receive additional interest under certain circumstances.

If we consummate the exchange offer in satisfaction of our obligations under the registration rights agreement, holders who do not tender their Outstanding Notes will generally have no further registration rights or any right to receive additional interest under certain circumstances pursuant to the registration rights agreement or otherwise, except as specified in the registration rights agreement.

You must comply with the exchange offer procedures in order to receive freely tradable Notes.

Delivery of the Notes in exchange for the Outstanding Notes tendered and accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of the following:

 

   

certificates for the Outstanding Notes or a book-entry confirmation of a book-entry transfer of the Outstanding Notes into the exchange agent’s account at DTC, as a depository, including an agent’s message, as defined in this prospectus, if the tendering holder does not deliver a letter of transmittal;

 

   

a completed and signed letter of transmittal, or facsimile copy, with any required signature guarantees, or, in the case of a book-entry transfer, an agent’s message in place of the letter of transmittal; and

 

   

any other documents required by the letter of transmittal.

 

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Therefore, holders of the Outstanding Notes who would like to tender the Outstanding Notes in exchange for Notes should be sure to allow enough time for the Outstanding Notes to be delivered on time. We are not required to notify you of defects or irregularities in tenders of Outstanding Notes for exchange. Outstanding Notes that are not tendered or that are tendered but we do not accept for exchange will, following consummation of the exchange offer, continue to be subject to the existing transfer restrictions under the Securities Act and will no longer have the registration and other rights under the registration rights agreement. See “The Exchange Offer—Procedures for Tendering.”

We may make repurchases of Outstanding Notes or pay those notes at maturity and any repurchases or repayments could be more favorable to holders of Outstanding Notes than the terms of this exchange offer.

We may, at any time, purchase Outstanding Notes in the open market, in privately negotiated transactions, through subsequent tender offers or otherwise. If any Outstanding Notes remain outstanding after consummation of the exchange offer, we may also pay in full at maturity those notes. Any other purchases may be on the same terms or on terms which may be more or less favorable to holders than the terms of the exchange offer. Any other purchases by us will depend on various factors existing at that time. The exchange offer will not prevent us from exercising our rights under the Indenture to defease or otherwise discharge our obligations with respect to the Outstanding Notes.

Some persons who participate in the exchange offer must deliver a prospectus in connection with resales of the Notes.

Based on the position of the SEC enunciated in Exxon Capital Holdings Corporation or similar interpretive letters, we believe that you may offer for resale, resell or otherwise transfer the Notes without compliance with the registration and prospectus delivery requirements of the Securities Act. However, in some instances described in this prospectus under “Plan of Distribution,” you will remain obligated to comply with the registration and prospectus delivery requirements of the Securities Act to transfer your Notes. In these cases, if you transfer any Note without delivering a prospectus meeting the requirements of the Securities Act or without an exemption from registration of your Notes under the Securities Act, you may incur liability under the Securities Act. We do not and will not assume, or indemnify you against, this liability.

Some holders who exchange their Outstanding Notes may be deemed to be underwriters and these holders will be required to comply with the registration and prospectus delivery requirements in connection with any resale transaction.

If you exchange your Outstanding Notes in the exchange offer for the purpose of participating in a distribution of the Notes, you may be deemed to have received restricted securities. If you are deemed to have received restricted securities, you will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction.

The exchange offer will result in reduced liquidity and fewer rights for the Outstanding Notes.

The Outstanding Notes are listed on the Hong Kong Stock Exchange by way of debt issues to Professional Investors only. To the extent the exchange offer is successful, the trading market for Outstanding Notes that are not tendered and exchanged will become very limited due to the reduction in the amount of Outstanding Notes outstanding after the exchange offer, which might adversely affect the liquidity and market price of such Outstanding Notes. The Outstanding Notes may trade at a significant discount depending on prevailing interest rates, the market for Outstanding Notes with similar credit features, our performance and other factors. Furthermore, the prices at which any such trading occurs in the Outstanding Notes could be extremely volatile. Holders of Outstanding Notes not tendered and exchanged may attempt to obtain quotations for their Outstanding Notes from their brokers; however, there can be no assurance that an active market in the Outstanding Notes will exist following consummation of the exchange offer and no assurance can be given as to the prices at which the Outstanding Notes may trade.

 

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Risks Related to the Notes

We have a substantial amount of indebtedness, which could have important consequences for holders of the Notes and significant effects on our business and future operations.

We have a substantial amount of debt in relation to our equity. As of June 30, 2020, we had US$7.0 billion of borrowings outstanding under the Senior Notes and US$2.02 billion of available borrowing capacity under the 2018 SCL Revolving Facility.

Our substantial indebtedness may make it more difficult for us to satisfy our obligations with respect to the Notes, increase our vulnerability to general adverse economic and industry conditions, impair our ability to obtain additional financing in the future for working capital needs, capital expenditure, acquisitions or general corporate purposes, require us to dedicate a significant portion of our cash flow from operations to the payment of principal and interest on our debt, which would reduce the funds available to us for our operations or expansion of our existing operations, limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate, place us at a competitive disadvantage as compared to our competitors, to the extent that they are not as leveraged, subject us to higher interest expense in the event of increases in interest rates to the extent a portion of our debt bears interest at variable rates, cause us to incur additional expenses by hedging interest rate exposures of our debt and exposure to hedging counterparties’ failure to pay under such hedging arrangements, which would reduce the funds available for us for our operations; and in the event we or one of our subsidiaries were to default, result in the loss of all or a substantial portion of our and our subsidiaries’ assets, over which our lenders have taken or will take security. Any of these or other consequences or events could have a material adverse effect on our ability to satisfy our other debt obligations, including the Notes.

In addition, under the terms of the Indenture, we are permitted to incur additional indebtedness, some of which may be senior secured indebtedness. If we incur additional indebtedness, the risks described above will be exacerbated.

Claims by any secured creditors will have priority with respect to their security over the claims of the holders of the Notes, to the extent of the value of the assets securing such indebtedness.

Claims by any secured creditors will have priority with respect to the assets securing their indebtedness over the claims of holders of the Notes. As such, the claims of the holders of the Notes will be effectively subordinated to any secured indebtedness and other secured obligations of the Company to the extent of the value of the assets securing such indebtedness or other obligations. As of June 30, 2020, the Company had no secured indebtedness. We may incur secured indebtedness or other secured obligations in the future, all of which will be effectively senior to the Notes to the extent of the value of the collateral securing such obligations.

The Notes will be structurally subordinated to the liabilities of our subsidiaries.

Our subsidiaries will not have any obligations to pay amounts due under the Notes or to make funds available for that purpose. In the event that any of our subsidiaries becomes insolvent, is liquidated, reorganized or dissolved or is otherwise wound up other than as a part of a solvent transaction:

 

   

the creditors of the Company (including the holders of the Notes) will have no right to proceed against the assets of such subsidiary; and

 

   

creditors of such subsidiary, including trade creditors, and any preferred shareholders of such subsidiary will generally be entitled to payment in full from the sale or other disposal of the assets of such subsidiary before the Company, as a direct or indirect shareholder, will be entitled to receive any distributions from such subsidiary.

 

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The limited covenants in the Indenture may not protect against developments that may impair our ability to repay the Notes or the trading price for the Notes.

The Indenture does not:

 

   

require us to maintain any financial ratios or specific levels of net worth, revenues, income, cash flow or liquidity and, accordingly, does not protect holders of the Notes if we experience significant adverse changes in our financial condition or results of operations;

 

   

limit our ability to incur indebtedness that is senior or equal in right of payment to the Notes;

 

   

limit our subsidiaries’ ability to incur unsecured indebtedness, all of which would be structurally senior to the Notes; or

 

   

restrict our ability to make investments or to repurchase, or pay dividends or make other payments in respect of, our ordinary shares or other securities ranking junior to the Notes.

An increase in the level of our indebtedness, or other events that could adversely affect our business, financial condition, results of operations or prospects, may cause rating agencies to downgrade any credit ratings on the Notes, which could adversely affect their trading price and liquidity, and downgrade our corporate rating generally, which could increase our cost of borrowing, limit our access to the capital markets and result in more restrictive covenants in future debt agreements.

We may not be able to generate sufficient cash flow to meet our debt service obligations.

Our ability to make scheduled payments due on our existing and anticipated debt obligations, including the Notes, and fund working capital needs, planned capital expenditure and development efforts will depend on our ability to generate sufficient operating cash flow from our projects. Our ability to obtain cash to service our existing and projected debts is subject to a range of economic, financial, competitive, regulatory, business and other factors, many of which are beyond our control, including:

 

   

our future operating performance;

 

   

the demand for services that we provide;

 

   

general economic conditions and economic conditions affecting Macao or the gaming industry in particular;

 

   

our ability to hire and retain employees and management at a reasonable cost;

 

   

competition; and

 

   

legislative and regulatory factors affecting our operations and business.

If our business does not generate sufficient cash flow from operations or if future borrowings are not available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs, we may need to refinance all or a portion of our indebtedness, including the Notes, on or before the maturity date, sell assets, reduce or delay capital investments or seek to raise additional capital, any of which could have a material adverse effect on our operations. In addition, we may not be able to effect any of these actions, if necessary, on commercially reasonable terms or at all. Our ability to sell assets or restructure or refinance our indebtedness, including the Notes, will depend on the condition of the financing and capital markets, our financial condition and our ability to obtain requisite governmental approvals at such time.

Any refinancing of any of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our operations. The terms of existing or future debt instruments, including the Indenture, may limit or prevent us from taking any of these actions. In addition, any failure to make scheduled payments of interest and principal on our outstanding indebtedness would likely result in downgrades

 

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of any credit ratings we or the Notes may have at such time, which could harm our ability to incur additional indebtedness on commercially reasonable terms or at all. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, could materially adversely affect our business, prospects, financial condition and results of operations, as well as our ability to satisfy our obligations with respect to the Notes.

If we are unable to comply with the restrictions and covenants in our debt agreements, including the Indenture, there could be a default under the terms of these agreements or the Indenture, which could cause repayment of our debt to be accelerated.

If we are unable to comply with the restrictions and covenants in our current or future debt and other agreements, or the Indenture, there could be a default under the terms of these agreements. In the event of a default under these agreements, the holders of the debt could terminate their commitments to lend to us, accelerate repayment of the debt and declare all amounts borrowed due and payable or terminate the agreements, as the case may be. Furthermore, some of our debt agreements, including the Indenture, contain or will contain, as applicable, cross-acceleration or cross-default provisions. As a result, our default under one debt agreement may cause the acceleration of repayment of debt or result in a default under our other debt agreements, including the Indenture. If any of these events occur, we cannot assure you that our assets and cash flow would be sufficient to repay in full all of our indebtedness, or that we would be able to obtain alternative financing on reasonable terms or at all.

Our subsidiaries are subject to restrictions on the payment of dividends and the repayment of intercompany loans or advances to us and our subsidiaries.

As a holding company, we depend on the receipt of dividends and the interest or principal payments on intercompany loans or advances from our subsidiaries to satisfy our obligations, including our obligations under the Notes. The ability of our subsidiaries to pay dividends and make payments on intercompany loans or advances to their shareholders is subject to, among other things, distributable earnings, cash flow conditions, restrictions contained in the articles of association of our subsidiaries, applicable laws and restrictions contained in the debt instruments of such subsidiaries. In the future, certain of our subsidiaries may incur debt in their own name, and the instruments governing such debt may require the lenders’ consent prior to the subsidiaries declaring dividends or otherwise restrict dividends or other distributions on their equity interests to us. These restrictions could reduce the amounts that we receive from our subsidiaries, which would restrict our ability to meet our payment obligations under the Notes.

As a result of the foregoing, we cannot assure you that we will have sufficient cash flow from dividends or payments on intercompany loans or advances from our subsidiaries to satisfy our obligations under the Notes.

We may not be able to repurchase the Notes upon the occurrence of certain events.

We must offer to purchase the Notes upon the occurrence of certain specified change of control triggering events or specified investor put option triggering events at a purchase price equal to 101% or 100% of the principal amount, respectively, plus accrued and unpaid interest. See “Description of Notes.” Furthermore, we may redeem the Notes if certain changes in tax law impose withholding taxes on amounts payable on the Notes, and, as a result, we are required to pay additional amounts with respect to such withholding taxes. See “Description of Notes.”

The sources of funds for any such purchases would be our available cash or third-party financing. However, we may not have enough available funds at the time of the occurrence of any change of control triggering events or investor put option triggering events to make purchases of outstanding Notes. Our failure to make a required offer to purchase or to purchase the outstanding Notes would constitute an event of default under the Notes. The event of default may, in turn, constitute an event of default under other indebtedness, any of which could cause

 

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the related debt to be accelerated after any applicable notice or grace periods. If our other debt were to be accelerated, we may not have sufficient funds to purchase the Notes and repay the debt.

In addition, the definition of change of control for purposes of the Indenture will not necessarily afford protection for the holders of the Notes in the event of some highly leveraged transactions, including certain acquisitions, mergers, refinancing, restructurings or other recapitalizations, although these types of transactions could increase our indebtedness or otherwise affect our capital structure or credit ratings. The definition of change of control for purposes of the Indenture also includes a phrase relating to the sale of “all or substantially all” of our assets. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition under applicable law. Accordingly, our obligation to make an offer to purchase the Notes and the ability of a holder of the Notes to require us to purchase its Notes pursuant to the offer as a result of a highly-leveraged transaction or a sale of less than all of our assets may be uncertain.

The insolvency laws of the Cayman Islands may provide you with less protection than U.S. bankruptcy law.

The Company is incorporated under the laws of the Cayman Islands. Accordingly, insolvency proceedings with respect to the Company would likely proceed under, and be governed by, Cayman Islands insolvency law. Cayman Islands insolvency laws may not be as favorable to investors as the laws of the United States or other jurisdictions with which investors are familiar.

You may have difficulty enforcing judgments obtained against us.

The Company is a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. All of our current operations and administrative and corporate functions are conducted in Macao and Hong Kong. In addition, the majority of our directors and officers are nationals and/or residents of countries other than the United States. A substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in Cayman Islands, Macao and Hong Kong courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, most of whom are not residents in the United States and the substantial majority of whose assets are located outside of the United States. In addition, there is uncertainty as to whether the courts of the Cayman Islands, Macao or Hong Kong would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. In addition, it is uncertain whether such Cayman Islands, Macao or Hong Kong courts would be competent to hear original actions brought in the Cayman Islands, Macao or Hong Kong against us or such persons predicated upon the securities laws of the United States or any state.

An active trading market for the Notes may not develop.

The Notes are new issues of securities for which there is currently no trading market. Although application will be made for the listing of the Notes on the Hong Kong Stock Exchange by way of debt issues to Professional Investors only, we cannot assure you that we will obtain or be able to maintain a listing on the Hong Kong Stock Exchange, or that, if listed, a liquid trading market will develop. We cannot predict whether an active trading market for any series of the Notes will develop or be sustained. If an active trading market for the Notes of any series does not develop or is not sustained, the market price and liquidity of such Notes may be adversely affected.

The liquidity and prices of the Notes may be volatile.

Even if an active trading market for the Notes of a series develops, the prices and trading volumes of such Notes may be highly volatile. Factors such as variations in our revenues, earnings and cash flows and proposals of new investments, strategic alliances or acquisitions, interest rates, the general state of the securities market

 

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(including the market for debt issued by other companies and debt issued by governments), market conditions in our industry and fluctuations in prices for comparable companies could result in large and sudden changes in the volume and price at which such Notes will trade.

We may elect to redeem the Notes prior to their maturity.

Pursuant to terms of each series of Notes, we may elect to redeem such Notes prior to their maturity in whole or in part at the price specified in the section entitled “Description of Notes—Optional Redemption.” The date on which we elect to redeem such Notes may not accord with the preference of particular noteholders. In addition, a noteholder may not be able to reinvest the redemption proceeds in comparable securities at the same rate of return of such Notes.

We will follow the applicable corporate disclosure standards for debt securities which are issued to Professional Investors only and listed on the Hong Kong Stock Exchange, and such standards may be different from those applicable to debt securities listed in certain other countries.

We will be subject to reporting obligations in respect of the Notes to be listed on the Hong Kong Stock Exchange. The disclosure standards imposed by the Hong Kong Stock Exchange may be different than those imposed by securities exchanges in other countries or regions such as the United States. As a result, the level of information that is available may not correspond to what investors in the Notes are accustomed to. See “Description of Notes—Certain Covenants—Reports.”

Modifications, waivers and other decisions may be made in relation to the Notes by the Trustee or by a proportion of Noteholders which may be considered to be adverse to the interests of individual or minority holders of the Notes, and in such circumstances, the recourse available to the minority Noteholders may be limited.

Certain modifications, waivers and other decisions may be made in relation to the Notes by the Trustee or by a proportion of Noteholders without the unanimous approval of all Noteholders of the same series of Notes. For example:

 

   

if an event of default (other than one arising from certain events of bankruptcy or insolvency) occurs and is continuing, the Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding Notes of an affected series may declare all the Notes of such series to be due and payable immediately;

 

   

subject to certain limitations, holders of a majority in aggregate principal amount of the then outstanding Notes of a series of Notes affected by an event of default may direct the Trustee in its exercise of any trust or power;

 

   

the Trustee may withhold from holders of the applicable Notes notice of any continuing default or event of default if it determines that withholding notice is in their interest, except a default or event of default relating to the payment of principal, interest or premium, if any;

 

   

except to enforce the right to receive payment of principal, interest or premium, if any, when due, no holder of a Note may pursue any remedy with respect to the Indenture or the applicable Notes unless certain conditions are met, which include (a) the holders of at least 25% in aggregate principal amount of the then outstanding Notes of such series have requested the Trustee to pursue the remedy and (b) the holders of a majority in aggregate principal amount of the then outstanding Notes of the relevant series have not given the Trustee a direction inconsistent with such request within certain relevant period;

 

   

the holders of a majority in aggregate principal amount of the then outstanding Notes of any series by notice to the Trustee may, on behalf of the holders of all of the Notes of such series, rescind an

 

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acceleration or waive any existing default or event of default and its consequences under the Indenture, except a continuing default or event of default in the payment of interest or premium, if any, on, or the principal of, the Notes of such series; and

 

   

except in certain circumstances (see “Description of Notes—Amendment, Supplement and Waiver”), the Indenture and the Notes of any series may be amended or supplemented with the consent of the holders of at least a majority in aggregate principal amount of the Notes then outstanding of the applicable series (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes of such series), and any existing default or event of default or compliance with any provision of the Indenture or the Notes of the applicable series may be waived with the consent of the holders of a majority in aggregate principal amount of the then outstanding Notes of such series (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes of such series).

Depending on the individual circumstances of the individual Noteholder at the relevant time, such modifications, waivers or other decisions may be considered to be adverse to the interests of individual or minority holders of the Notes, and in such circumstances, the recourse available to the minority Noteholders which did not approve or request such modifications, waivers or other decisions may be limited. See “Description of Notes—Events of Default and Remedies” and “Description of Notes—Amendment, Supplement and Waiver” for further details.

 

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USE OF PROCEEDS

We will not receive any cash proceeds from the issuance of the Notes. In consideration for issuing the Notes as contemplated in this prospectus, we will receive in exchange a like principal amount of Outstanding Notes, the terms of which are identical in all material respects to the Notes. The Outstanding Notes surrendered in exchange for the Notes will be retired and canceled and cannot be reissued. Accordingly, issuance of the Notes will not result in any change in our capitalization or result in any increase in our indebtedness.

The net proceeds to us from the issuance of the Outstanding Notes were approximately US$1.48 billion, after deducting the discounts of the initial purchasers and other offering expenses payable by us. We will use the net proceeds from the offering of the Outstanding Notes for incremental liquidity and general corporate purposes.

 

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CAPITALIZATION

The following table sets forth our consolidated cash and cash equivalents and capitalization as of June 30, 2020 (i) on an actual basis and (ii) as adjusted to give effect to the net proceeds from the issuance of the Outstanding Notes, after deducting the discounts of the initial purchasers of the Outstanding Notes and other offering expenses payable by us, and to this exchange offer. The issuance of the Notes will not result in any change in our capitalization or result in any increase in our indebtedness. See “Use of Proceeds.”

The following table should be read in conjunction with “Selected Financial Information” and unaudited consolidated financial statements and related notes included elsewhere in this prospectus.

 

     As of June 30, 2020  
     Actual      As Adjusted  
     (unaudited, US$ in millions)  

Cash and cash equivalents

   $ 1,592    $ 1,592

Restricted cash and cash equivalents

     16      16
  

 

 

    

 

 

 

Total cash and cash equivalents

     1,608      1,608
  

 

 

    

 

 

 

Long-term debt 4.600% Senior Notes due 2023(i)

     1,800      1,800

5.125% Senior Notes due 2025(ii)

     1,800      1,800

5.400% Senior Notes due 2028(iii)

     1,900      1,900

Outstanding Notes(iv) and Notes offered hereby

     1,500      1,500

2018 SCL Credit Facility(v)

     —          —    
  

 

 

    

 

 

 

Total long-term debt

     7,000      7,000
  

 

 

    

 

 

 

Total equity

     2,729      2,729
  

 

 

    

 

 

 

Total capitalization

   $ 9,729    $ 9,729
  

 

 

    

 

 

 

 

(i)

Excludes original issue discount and deferred financing costs of US$9 million and a positive cumulative fair value adjustment of US$4 million.

(ii)

Excludes original issue discount and deferred financing costs of US$12 million and a positive cumulative fair value adjustment of US$4 million.

(iii)

Excludes original issue discount and deferred financing costs of US$18 million and a positive cumulative fair value adjustment of US$5 million.

(iv)

Excludes original issue discount and deferred financing costs related to the issuance of the Notes totaling US$18 million.

(v)

As of June 30, 2020 we had US$2.02 billion of available borrowing capacity. Excludes deferred financing costs of US$29 million.

Except as otherwise disclosed above, there has been no material change in our capitalization since June 30, 2020.

 

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SELECTED FINANCIAL INFORMATION

The following selected historical financial and other data as of and for the years ended December 31, 2017, 2018 and 2019 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The following selected historical financial and other data as of and for the years ended December 31, 2015 and 2016 have been derived from our audited consolidated financial statements not included in this prospectus. The following selected historical financial and other data as of and for the six months ended June 30, 2019 and 2020 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited information on the same basis as the audited consolidated financial statements, and have included, in our opinion, all adjustments, consisting of normal and recurring adjustments that we consider necessary for a fair presentation of the financial information set forth in those statements. Our audited and unaudited consolidated financial statements are prepared in accordance with IFRS.

You should read this section in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and those financial statements and the notes to those statements included elsewhere in this prospectus. The results for any historical period are not necessarily indicative of the results of operations to be expected in any future period.

 

     Year Ended December 31,     Six Months Ended June 30,  
     2015     2016     2017     2018     2019     2019     2020(i)  
     (US$ in millions)  

Consolidated income statement data

              

Net revenues

   $ 6,683   $ 6,543   $ 7,586   $ 8,665   $ 8,808   $ 4,468   $ 848

Total operating expenses

     (5,164     (5,191     (5,813     (6,511     (6,533     (3,281     (1,457
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit (loss)

     1,519     1,352     1,773     2,154     2,275     1,187     (609

Interest income

     11     3     5     20     38     21     9

Interest expense, net of amounts capitalized

     (60     (86     (153     (225     (280     (147     (116

Loss on modification or early retirement of debt

     —         (1     —         (81     —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) before income tax

     1,470     1,268     1,625     1,868     2,033     1,061     (716

Income tax (expense) benefit

     (11     (44     (22     7     —         6     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) attributable to equity holders of the Company

   $ 1,459   $ 1,224   $ 1,603   $ 1,875   $ 2,033   $ 1,067   $ (716
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Property EBITDA(ii)

   $ 2,223   $ 2,244   $ 2,611   $ 3,079   $ 3,193   $ 1,625   $ (243

Capital expenditures

   $ 1,265   $ 1,151   $ 477   $ 532   $ 754   $ 225   $ 571

Consolidated balance sheet and other financial data (at period end)(iii)

              

Total assets

   $ 10,772   $ 11,183   $ 10,647   $ 12,058   $ 12,100   $ 11,092   $ 11,335

Long-term debt(iv)

   $ 3,389   $ 4,388   $ 4,348   $ 5,500   $ 5,500   $ 5,500   $ 7,000

Total equity

   $ 5,839   $ 5,007   $ 4,538   $ 4,409   $ 4,446   $ 3,456   $ 2,729

Total debt(iv)

   $ 3,389   $ 4,388   $ 4,348   $ 5,500   $ 5,500   $ 5,500   $ 7,000

Less: Cash and cash equivalents

     (1,283     (1,284     (1,239     (2,676     (2,471     (1,785     (1,592

Restricted cash and cash equivalents

     (8     (10     (11     (13     (15     (14     (16
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net debt(iv)

   $ 2,098   $ 3,094   $ 3,098   $ 2,811   $ 3,014   $ 3,701   $ 5,392

Ratio of total debt to Adjusted Property EBITDA

     1.5x       2.0x       1.7x       1.8x       1.7x       N/A       N/A  

Ratio of net debt to Adjusted Property EBITDA

     0.9x       1.4x       1.2x       0.9x       0.9x       N/A       N/A  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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(i)

The COVID-19 Pandemic has significantly impacted our operations, as explained in other areas of this document. See “Summary—Recent Developments.”

(ii)

“Adjusted Property EBITDA,” which is a non-IFRS financial measure, is profit or loss attributable to equity holders of the Company before share-based compensation, corporate expense, pre-opening expense, depreciation and amortization, net foreign exchange gains or losses, impairment loss on property and equipment, gain or loss on disposal of property and equipment, investment properties and intangible assets, interest, gain or loss on modification or early retirement of debt and income tax benefit or expense. Management utilizes Adjusted Property EBITDA to compare the operating profitability of its operations with those of its competitors, as well as a basis for determining certain incentive compensation. Integrated resort companies have historically reported Adjusted Property EBITDA as a supplemental performance measure to IFRS financial measures. In order to view the operations of their properties on a more stand- alone basis, integrated resort companies, including the Company, have historically excluded certain expenses that do not relate to the management of specific properties, such as pre-opening expense and corporate expense, from their Adjusted Property EBITDA calculations. Adjusted Property EBITDA should not be interpreted as an alternative to profit or operating profit (as an indicator of operating performance) or to cash flows from operations (as a measure of liquidity), in each case, as determined in accordance with IFRS. The Company has significant uses of cash flow, including capital expenditures, dividend payments, interest payments, debt principal repayments and income taxes, which are not reflected in Adjusted Property EBITDA. Not all companies calculate Adjusted Property EBITDA in the same manner. As a result, Adjusted Property EBITDA as presented by the Company may not be directly comparable to other similarly titled measures presented by other companies. For a quantitative reconciliation of Adjusted Property EBITDA to its most directly comparable IFRS measurement, see the table below.

 

     Year ended December 31,     Six months ended
June 30,
 
     2015     2016     2017     2018     2019     2019     2020  
   (US$ in millions)  

Profit (loss) attributable to equity holders of the Company

   $ 1,459   $ 1,224   $ 1,603   $ 1,875   $ 2,033   $ 1,067   $ (716

Income tax expense (benefit)

     11       44       22       (7     —         (6     —    

Loss on modification or early retirement of debt

     —         1       —         81       —         —         —    

Interest expense, net of amount capitalized

     60       86       153       225       280       147       116  

Interest income

     (11     (3     (5     (20     (38     (21     (9

Loss on disposal of property and equipment, investment properties and intangible assets

     20       12       12       131       16       3       7  

Impairment loss on property and equipment

     —         —         —         —         65       —         —    

Net foreign exchange losses (gains)

     (1     (1     11       (4     (35     (12     (20

Depreciation and amortization

     535       611       676       655       706       364       338  

Pre-opening expense

     45       127       7       5       23       10       5  

Corporate expense

     86       128       120       125       129       66       28  

Share-based compensation, net of amount capitalized

     19       15       12       13       14       7       8  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Property EBITDA

   $ 2,223   $ 2,244   $ 2,611   $ 3,079   $ 3,193   $ 1,625   $ (243
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(iii)

On June 4, 2020, we issued US$800 million Outstanding 2026 Notes and US$700 million Outstanding 2030 Notes. The net proceeds from the offering of the Outstanding Notes were approximately US$1.48 billion,

 

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  after deducting the discounts of the initial purchasers and other offering expenses payable by us. We will use the net proceeds from the offering of the Outstanding Notes for incremental liquidity and general corporate purposes.
(iv)

Excludes deferred financing costs totaling US$84 million, US$94 million, US$73 million, US$88 million, US$74 million, US$80 million and US$86 million, respectively, and lease liabilities of US$80 million, US$80 million, US$137 million, US$135 million, US$147 million, US$148 million and US$146 million, respectively. Also excludes a positive cumulative fair value adjustment of US$15 million and US$35 million, as of December 31, 2018 and 2019, respectively, and US$52 million and US$13 million as of June 30, 2019 and 2020, respectively.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in connection with “Selected Financial Information” and our consolidated financial statements, including the notes thereto, included elsewhere in this prospectus. Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. See “Forward-Looking Statements” regarding these statements. Our historical consolidated financial statements have been prepared in accordance with IFRS. For additional information, see Note 2 of our audited financial statements included elsewhere in this prospectus.

Overview

We are the leading developer, owner and operator of large-scale integrated resorts in Macao, as measured by Adjusted Property EBITDA for the year ended December 31, 2019. VML, our subsidiary, holds one of six concessions or subconcessions permitted by the Macao government to operate casinos or gaming areas in Macao. Macao is the largest gaming market in the world as measured by casino gaming revenue and is the only location in China offering legalized casino gaming.

We developed, own and operate The Venetian Macao, Sands Cotai Central, The Parisian Macao, The Plaza Macao and Sands Macao. We also own the Cotai Expo, one of the largest convention and exhibition centers in Asia, as well as Macao’s largest entertainment venue, the Cotai Arena. Our properties collectively feature over 11,700 luxury suites and hotel rooms, approximately 150 different restaurants and food outlets, spas and theaters for live performances, as well as other integrated resort amenities.

Our business strategy is to develop Cotai and to leverage our large-scale integrated resort business model to create Asia’s premier gaming, leisure, convention and meetings destination. Our interconnected integrated resorts, which have a wide range of branded hotel and resort offerings, are designed to attract different segments of the market all year round. We believe our business strategy and development plan will allow us to achieve more consistent demand, longer average length of stay in our hotels, more diversified sources of revenue and higher margins than more gaming-centric facilities.

In 2019, we continued to benefit from strong operating performances across our properties as described in more detail below. During the year ended December 31, 2019, we had accomplishments in furthering several of our strategic objectives. We continued progress on our key development projects in Macao for the conversion of Sands Cotai Central into The Londoner Macao and opened gaming spaces in The Grand Suites at Four Seasons along with having certain luxury suites available for simulation purposes. Finally, we continued to maintain a robust balance sheet, deriving most of our operating cash flows from our casino, mall and hotel operations. With the opening of the Hong Kong-Zhuhai-Macao Bridge, and the progress of the Greater Bay Area Initiatives, we truly believe Macao has the potential to become the MICE and leisure capital of Asia. We fully intend to contribute to that objective, through both our existing assets and potential future investments.

We will continue to invest in the expansion of our facilities and the enhancement of the leisure and business tourism appeal of our Cotai property portfolio.

For the years ended December 31, 2017, 2018 and 2019, our total net revenues were US$7.59 billion, US$8.67 billion and US$8.81 billion, respectively, and our profits were US$1.60 billion, US$1.87 billion and US$2.03 billion, respectively. For the six months ended June 30, 2019 and 2020, our total net revenues were US$4.47 billion and US$848 million, respectively, and a profit of US$1.07 billion and a loss of US$716 million, respectively.

See “Summary—Recent Developments” for a discussion of our financial condition and results of operations since December 31, 2019.

 

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On June 4, 2020, we completed a private offering of US$800 million Outstanding 2026 Notes and US$700 million Outstanding 2030 Notes, in a transaction exempt from the registration under the Securities Act. The net proceeds to us from the issuance of the Outstanding Notes were approximately US$1.48 billion, after deducting the discounts of the initial purchasers and other offering expenses payable by us. We will use the net proceeds from the offering of the Outstanding Notes for incremental liquidity and general corporate purposes.

COVID-19 Pandemic

In early January 2020, an outbreak of a respiratory illness caused by a novel coronavirus was identified and the disease has since spread rapidly across the world causing the World Health Organization to declare the outbreak of a pandemic on March 12, 2020. As a result, people across the globe have been advised to avoid non-essential travel. Steps have also been taken by various countries to restrict inbound international travel and implement closures of non-essential operations to contain the spread of the virus.

Visitation to Macao has decreased substantially, driven by various government policies limiting travel. The China Individual Visit Scheme to Macao (“China IVS”) and tour group visas were suspended, and a complete ban on entry or a need to undergo enhanced quarantine requirements depending on the person’s residency and their recent travel history, has been enacted by the Macao government for Macao residents, citizens of mainland China, Hong Kong residents, foreigner workers residing in Macao and international travelers.

The Macao government suspended all gaming operations beginning on February 5, 2020. The Group’s casino operations resumed on February 20, 2020, except for casino operations at Sands Cotai Central, which resumed on February 27, 2020. Certain health safeguards, however, such as limiting the number of seats per table game, slot machine spacing, temperature checks, mask protection, health declarations showing green health-codes, and negative COVID-19 test results, remain in effect at the present time. The Group is currently unable to determine when these measures will be modified or cease to be necessary.

Some of the Group’s hotel facilities were also closed during the casino suspension in response to the drop in visitation and, with the exception of the Conrad Macao, Cotai Strip at Sands Cotai Central (the “Conrad hotel”), these hotels were gradually reopened from February 20, 2020, in line with operational needs and demand. The Conrad hotel reopened on June 13, 2020. Additionally, in support of the Macao government’s initiatives to fight the COVID-19 Pandemic, the Group provided one tower (approximately 2,000 hotel rooms) at the Sheraton Grand Macao Hotel, Cotai Strip at Sands Cotai Central to the Macao government to house individuals who return to Macao for quarantine purposes during two different periods in 2020.

A limited number of restaurants across the Group’s properties have reopened. The majority of retail outlets in the Group’s various shopping malls are open with reduced operating hours. The timing and manner in which these areas will return to full operation are currently unknown.

The Hong Kong government temporarily closed the Hong Kong China Ferry Terminal in Kowloon on January 30, 2020 and the Hong Kong Macau Ferry Terminal in Hong Kong on February 4, 2020. In response, the Group suspended its Macao ferry operations between Macao and Hong Kong. From June 17, 2020 until July 16, 2020, Cotai Water Jet operated a special sailing service between the Taipa Ferry Terminal and Hong Kong International Airport to facilitate the return of Macao residents from overseas and to enable the return of those located in Macao to their place of origin. The timing and manner in which the Group’s normal ferry operations will be able to resume are currently unknown.

As of June 30, 2020, Macao has had 46 confirmed cases of COVID-19 and no deaths attributed to COVID-19 according to data published by the Macao government.

The Macao government announced total visitation from mainland China to Macao on a monthly basis decreased by 14.9% (with an 83.3% decrease in visitation over the first seven days of Chinese New Year

 

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Holiday) in January 2020 and decreased in a range of 96.3% to 99.6% in February to June 2020, as compared to the same periods in 2019. It also announced monthly gross gaming revenue decreased by 11.3% in January 2020 and decreased in a range of 79.7% to 97.0% in February to June 2020 as compared to the same periods in 2019.

Current Impact of the COVID-19 Pandemic on our Liquidity and Financial Results

The disruptions arising from the COVID-19 Pandemic had a significant adverse impact on the Group’s operations during the six months ended June 30, 2020. Net revenues for the six months ended June 30, 2020, totaled US$848 million compared to US$4.47 billion for the six months ended June 30, 2019, representing a decrease of 81.0%. We recorded an operating loss of US$609 million and a net loss of US$716 million in the first half of 2020, as compared to an operating income of US$1.19 billion and a net income of US$1.07 billion in the same period in the prior year. Adjusted property EBITDA loss totaled US$243 million in the half year ended June 30, 2020, as compared to adjusted property EBITDA of US$1.63 billion in the same period in the prior year. For a quantitative reconciliation of Adjusted Property EBITDA to its most directly comparable IFRS measurement, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of Non-IFRS Financial Measures.”

As of June 30, 2020, the Group had total liquidity of US$3.63 billion, consisting of US$1.61 billion of total cash and cash equivalents and US$2.02 billion of available borrowing capacity under the 2018 SCL Revolving Facility. The Group believes it will be able to support its continuing operations, complete the major construction projects that are underway, and respond to the current COVID-19 Pandemic challenges. The Group has taken various mitigating measures to manage through the current environment, including a cost and capital expenditure reduction program to minimize cash outflow of non-essential items. On April 17, 2020, the Company announced that the Board resolved not to recommend the payment of a final dividend in respect of the year ended December 31, 2019.

If the Group’s integrated resorts are not permitted to resume normal operations, travel restrictions such as those related to the China IVS and other global restrictions on inbound travel from other countries are not modified or eliminated or the global response to contain the COVID-19 Pandemic escalates or is unsuccessful, the Group’s operations, cash flows and financial condition will be further materially impacted. The duration and intensity of this global health emergency and related disruptions are uncertain. Given the dynamic nature of these circumstances, the impact on the Company’s consolidated results of operations, cash flows and financial condition in 2020 will be material. The Group cannot reasonably estimate the impact at this time. It is unknown when the COVID-19 Pandemic will end, when or how quickly the current travel restrictions will be modified or cease to be necessary and the resulting impact on the Group’s business and the willingness of the Group’s customers to spend on travel, entertainment and MICE.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with IFRS requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information currently available to us and on various other assumptions management believes to be reasonable under the circumstances. Actual results could vary from those estimates and we may change our estimates and assumptions in future evaluations. Changes in these estimates and assumptions may have a material effect on our financial condition and results of operations. Our critical accounting policies and estimates include the useful lives of investment properties and property and equipment, impairment of non-financial assets, provision of expected credit losses for trade receivables and litigation provisions. We believe these critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. For a discussion of these critical accounting policies and estimates, see Note 3 to our audited consolidated financial statements included elsewhere in this prospectus.

 

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Key Operating Revenue Measurements

Operating revenues at The Venetian Macao, Sands Cotai Central, The Parisian Macao and The Plaza Macao are dependent upon the volume of customers who stay at the hotel, which affects the price that can be charged for hotel rooms and our gaming volume. Operating revenues at the Sands Macao are principally driven by casino customers who visit the property on a daily basis.

Management utilizes the following volume and pricing measures in order to evaluate past performance and assist in forecasting future revenues. The various volume measurements indicate our ability to attract customers to our Integrated Resorts. In casino operations, win and hold percentages indicate the amount of revenue to be expected based on volume. In hotel operations, average daily rate and revenue per available room indicate the demand for rooms and our ability to capture that demand. In mall operations, base rent per square foot indicates our ability to attract and maintain profitable tenants for our leasable space. The following are the key measurements we use to evaluate operating revenues:

Casino revenue measurements

Table games are segregated into two groups, consistent with the Macao market’s convention: Rolling Chip play (composed of VIP players) and Non-Rolling Chip play (mostly non-VIP players). The volume measurement for Rolling Chip play is non-negotiable gaming chips wagered and lost. The volume measurement for Non-Rolling Chip play is table games drop (“drop”), which is net markers issued (credit instruments), cash deposited in the table drop boxes and gaming chips purchased and exchanged at the cage. Rolling Chip and Non-Rolling Chip volume measurements are not comparable as they are two distinct measures of volume. The amounts wagered and lost for Rolling Chip play are substantially higher than the amounts dropped for Non-Rolling Chip play. Slot handle, also a volume measurement, is the gross amount wagered for the period cited.

We view Rolling Chip win as a percentage of Rolling Chip volume, Non-Rolling Chip win as a percentage of drop and slot hold (amount won by the casino) as a percentage of slot handle. Win or hold percentage represents the percentage of Rolling Chip volume, Non-Rolling Chip drop or slot handle that is won by the casino and recorded as casino revenue. Our win and hold percentages are calculated before discounts, commissions, deferring revenue associated with our loyalty programs and allocating casino revenues related to goods and services provided to patrons on a complimentary basis. Based upon our mix of table games, our Rolling Chip win percentage is expected to be 3.15% to 3.45%. Generally, slot machine play is conducted on a cash basis. Approximately 14.7% and 26.4% of our table games play was conducted on a credit basis for the year ended December 31, 2019 and the six months ended June 30, 2020, respectively.

Hotel revenue measurements

Performance indicators used are occupancy rate (a volume indicator), which is the average percentage of available hotel rooms occupied during a period and ADR (a price indicator), which is the average price of occupied rooms per day. Available rooms exclude those rooms unavailable for occupancy during the period due to renovation, development or other requirements (such as government mandated closure, lodging for team members and usage by the Macao government for quarantine measures). The calculations of the occupancy rate and ADR include the impact of rooms provided on a complimentary basis. Revenue per available room (“RevPAR”) represents a summary of hotel ADR and occupancy. Because not all available rooms are occupied, ADR is normally higher than RevPAR. Reserved rooms where the guests do not show up for their stay and lose their deposit, or where guests check out early, may be re-sold to walk-in guests.

Mall revenue measurements

Occupancy, base rent per square foot and tenant sales per square foot are used as performance indicators. Occupancy represents GLOA divided by GLA at the end of the reporting period. GLOA is the sum of: (1) tenant

 

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occupied space under lease and (2) tenants no longer occupying space, but paying rent. GLA does not include space currently under development or not on the market for lease. Base rent per square foot is the weighted average base or minimum rent charge in effect at the end of the reporting period for all tenants that would qualify to be included in occupancy. Tenant sales per square foot is the sum of reported comparable sales for the trailing 12 months divided by the comparable square footage for the same period. Only tenants that have been open for a minimum of 12 months are included in the tenant sales per square foot calculation.

Results of Operations

Six months ended June 30, 2020 compared to six months ended June 30, 2019.

Our net revenues consisted of the following for the periods indicated:

 

     Six months ended June 30,  
     2020      2019      Percent
Change
 
     (US$ in millions)  

Casino

   $ 625    $ 3,586      (82.6)%  

Rooms

     71        364        (80.5)%  

Mall

     99        240        (58.8)%  

Food and beverage

     27        154        (82.5)%  

Convention, ferry, retail and other

     26        124        (79.0)%  
  

 

 

    

 

 

    

 

 

 

Total net revenues

   $ 848    $ 4,468      (81.0)%  
  

 

 

    

 

 

    

 

 

 

Net revenues were US$848 million for the six months ended June 30, 2020, a decrease of 81.0%, compared to US$4.47 billion for the six months ended June 30, 2019. Net revenues decreased in all business categories, mainly driven by significant decreases in visitation due to travel restrictions as a result of the COVID-19 Pandemic.

 

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Casino Revenues. Our net casino revenues for the six months ended June 30, 2020 were US$625 million, a decrease of 82.6%, compared to US$3.59 billion for the six months ended June 30, 2019. The decrease was driven by decrease in volume in all gaming offerings as a result of the COVID-19 Pandemic described above. The following table summarizes the results of our casino activity for the periods indicated:

 

     Six months ended June 30,  
     2020     2019     Change  
     (US$ in millions)  

The Venetian Macao

      

Total net casino revenues

   $ 256   $ 1,438     (82.2 )% 

Non-Rolling Chip drop

     832     4,612     (82.0 )% 

Non-Rolling Chip win percentage

     26.9     26.6     0.3  pts 

Rolling Chip volume

     2,378     13,945     (82.9 )% 

Rolling Chip win percentage(i)

     2.96     3.18     (0.2 ) pts 

Slot handle

     497     1,912     (74.0 )% 

Slot hold percentage

     4.2     4.7     (0.5 ) pts 

Sands Cotai Central

      

Total net casino revenues

   $ 124   $ 803     (84.6 )% 

Non-Rolling Chip drop

     561     3,326     (83.1 )% 

Non-Rolling Chip win percentage

     21.8     22.7     (0.9 ) pts 

Rolling Chip volume

     167     3,216     (94.8 )% 

Rolling Chip win percentage(i)

     5.85     3.85     2.0  pts 

Slot handle

     377     2,077     (81.8 )% 

Slot hold percentage

     4.4     4.2     0.2  pts 

The Parisian Macao

      

Total net casino revenues

   $ 85   $ 730     (88.4 )% 

Non-Rolling Chip drop

     396     2,276     (82.6 )% 

Non-Rolling Chip win percentage

     23.7     23.0     0.7  pts 

Rolling Chip volume

     2,272     8,063     (71.8 )% 

Rolling Chip win percentage(i)

     0.99     3.99     (3.0 ) pts 

Slot handle

     451     2,141     (78.9 )% 

Slot hold percentage

     3.5     3.6     (0.1 ) pts 

The Plaza Macao

      

Total net casino revenues

   $ 91   $ 335     (72.8 )% 

Non-Rolling Chip drop

     229     688     (66.7 )% 

Non-Rolling Chip win percentage

     28.0     24.3     3.7  pts 

Rolling Chip volume

     2,189     7,726     (71.7 )% 

Rolling Chip win percentage(i)

     2.73     3.71     (1.0 ) pts 

Slot handle

     37     280     (86.8 )% 

Slot hold percentage

     4.7     6.2     (1.5 ) pts 

Sands Macao

      

Total net casino revenues

   $ 69   $ 280     (75.4 )% 

Non-Rolling Chip drop

     278     1,362     (79.6 )% 

Non-Rolling Chip win percentage

     19.1     17.5     1.6  pts 

Rolling Chip volume

     726     2,462     (70.5 )% 

Rolling Chip win percentage(i)

     3.29     1.88     1.4  pts 

Slot handle

     353     1,306     (73.0 )% 

Slot hold percentage

     3.1     3.3     (0.2 ) pts 

 

Note:

As a result of the COVID-19 Pandemic, gaming operations were closed from February 5–19, 2020, except for Sands Cotai Central which was closed from February 5–26, 2020.

(i)

This compares to our expected Rolling Chip win percentage of 3.15% to 3.45% (calculated before discounts, commissions, deferring revenue associated with our loyalty program and allocating casino revenues related to goods and services provided to patrons on a complimentary basis). The expected target and range was revised due to the increase in Rolling Chip win percentage experienced over the last several years.

 

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Room Revenues. Room revenues for the six months ended June 30, 2020 were US$71 million, a decrease of 80.5%, compared to US$364 million for the six months ended June 30, 2019. The decrease was mainly driven by decreased demand as a result of the COVID-19 Pandemic described above. The following table summarizes the results of our room activity for the periods indicated:

 

     Six months ended June 30,  
     2020     2019     Change  
     (US$ in millions, except average daily rate
and revenue per available room)
 

The Venetian Macao

      

Total room revenues

   $ 22   $ 110     (80.0 )% 

Occupancy rate

     22.3     95.3     (73.0 )pts 

Average daily rate (in US$)

     237     225     5.3

Revenue per available room (in US$)

     53     214     (75.2 )% 

Sands Cotai Central

      

Total room revenues

   $ 27   $ 161     (83.2 )% 

Occupancy rate

     23.0     96.1     (73.1 )pts 

Average daily rate (in US$)

     174     156     11.5

Revenue per available room (in US$)

     40     150     (73.3 )% 

The Parisian Macao

      

Total room revenues

   $ 14   $ 64     (78.1 )% 

Occupancy rate

     21.9     97.2     (75.3 )pts 

Average daily rate (in US$)

     167     158     5.7

Revenue per available room (in US$)

     37     153     (75.8 )% 

The Plaza Macao

      

Total room revenues

   $ 5   $ 20     (75.0 )% 

Occupancy rate

     26.4     89.8     (63.4 )pts 

Average daily rate (in US$)

     332     335     (0.9 )% 

Revenue per available room (in US$)

     88     301     (70.8 )% 

Sands Macao

      

Total room revenues

   $ 3   $ 9     (66.7 )% 

Occupancy rate

     35.9     99.7     (63.8 )pts 

Average daily rate (in US$)

     176     174     1.1

Revenue per available room (in US$)

     63     173     (63.6 )% 

 

Note:

As a result of the COVID-19 Pandemic, some of our hotel operations were closed for a period in the first half of 2020, with a number of rooms utilized for government quarantine purposes and to provide lodging for team members restricted from traveling between their residences and Macao. These rooms were excluded from the calculation of hotel statistics above.

 

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Mall Revenues. Mall revenues for the six months ended June 30, 2020 were US$99 million, a decrease of 58.8%, compared to US$240 million for the six months ended June 30, 2019. The decrease was primarily driven by US$135 million of rent concessions granted to our mall tenants in response to the COVID-19 Pandemic. The following table summarizes the results of our mall activity on Cotai for the periods indicated:

 

     Six months ended June 30,  
     2020     2019     Change  
     (US$ in millions, except per square foot
amount)
 

Shoppes at Venetian

      

Total mall revenues

   $ 47   $ 118     (60.2 )% 

Mall gross leasable area (in square feet)

     812,934       812,966       —  

Occupancy

     85.6     91.3     (5.7 )pts 

Base rent per square foot (in US$)

     292     270     8.1

Tenant sales per square foot (in US$)(i)

     1,224     1,688     (27.5 )% 

Shoppes at Cotai Central(ii)

      

Total mall revenues

   $ 16   $ 32     (50.0 )% 

Mall gross leasable area (in square feet)

     525,497       523,511       0.4

Occupancy

     87.6     91.3     (3.7 )pts 

Base rent per square foot (in US$)

     102     106     (3.8 )% 

Tenant sales per square foot (in US$)(i)

     603     967     (37.6 )% 

Shoppes at Parisian

      

Total mall revenues

   $ 10   $ 27     (63.0 )% 

Mall gross leasable area (in square feet)

     295,963       295,915       —  

Occupancy

     86.8     89.9     (3.1 )pts 

Base rent per square foot (in US$)

     150     151     (0.7 )% 

Tenant sales per square foot (in US$)(i)

     561     650     (13.7 )% 

Shoppes at Four Seasons

      

Total mall revenues

   $ 26   $ 62     (58.1 )% 

Mall gross leasable area (in square feet)

     242,425       241,548       0.4

Occupancy

     94.6     97.6     (3.0 )pts 

Base rent per square foot (in US$)

     544     465     17.0

Tenant sales per square foot (in US$)(i)

     3,775     4,505     (16.2 )% 

 

Note:

This table excludes the results of our mall operations at Sands Macao. As a result of the COVID-19 Pandemic, tenants were provided rent concessions during the six months ended June 30, 2020. Base rent per square foot presented above excludes the impact of these rent concessions.

(i)

Tenant sales per square foot reflects sales from tenants only after the tenant has been opened for a period of 12 months.

(ii)

Shoppes at Cotai Central will be rebranded to Shoppes at Londoner and feature up to approximately 600,000 square feet of gross leasable area upon completion of all phases of Sands Cotai Central’s renovation, rebranding and expansion to The Londoner Macao.

Food and beverage revenues. Food and beverage revenues for the six months ended June 30, 2020 were US$27 million, a decrease of 82.5%, compared to US$154 million for the six months ended June 30, 2019. The decrease was primarily driven by a decrease in property visitation as a result of the COVID-19 Pandemic described above.

Convention, ferry, retail and other revenues. Convention, ferry, retail and other revenues for the six months ended June 30, 2020 were US$26 million, a decrease of 79.0%, compared to US$124 million for the six months ended June 30, 2019. The decrease was primarily driven by a decrease of US$41 million in our ferry operations due to the temporary closure of the Hong Kong China Ferry Terminal in late January 2020 and the Hong Kong

 

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Macau Ferry Terminal in early February 2020 in response to the COVID-19 Pandemic, as well as decreases in other business categories, such as convention, entertainment and retail as a result of the COVID-19 Pandemic described above.

Operating Expenses

Our operating expenses consisted of the following:

 

     Six months ended June 30,  
     2020     2019     Percent
Change
 
     (US$ in millions)  

Casino

   $ 635   $ 2,156     (70.5 )% 

Rooms

     54     93     (41.9 )% 

Mall

     20     24     (16.7 )% 

Food and beverage

     65     131     (50.4 )% 

Convention, ferry, retail and other

     41     89     (53.9 )% 

Provision for expected credit losses, net

     9     14     (35.7 )% 

General and administrative

     274     343     (20.1 )% 

Corporate

     29     66     (56.1 )% 

Pre-opening

     5     10     (50.0 )% 

Depreciation and amortization

     338     364     (7.1 )% 

Net foreign exchange gains

     (20     (12     66.7

Loss on disposal of property and equipment, investment properties and intangible assets

     7     3     133.3
  

 

 

   

 

 

   

 

 

 

Total operating expenses

   $ 1,457   $ 3,281     (55.6 )% 
  

 

 

   

 

 

   

 

 

 

Operating expenses were US$1.46 billion for the six months ended June 30, 2020, a decrease of 55.6%, compared to US$3.28 billion for the six months ended June 30, 2019. The decrease in operating expenses was primarily due to a decrease in business volume across all business categories. Although management has implemented certain cost reduction programs, operating margins in each business segment were negatively impacted due to employee and other costs incurred during this period of decreased visitation and property closures. We have maintained our staffing levels amid significantly reduced visitation. We have implemented payroll cost saving initiatives across each of our properties, including utilization of paid time off and unpaid leave.

Casino expenses for the six months ended June 30, 2020 were US$635 million, a decrease of 70.5%, compared to US$2.16 billion for the six months ended June 30, 2019. The decrease was primarily due to decrease in gaming taxes as a result of decreased casino revenues.

Room expenses for the six months ended June 30, 2020 were US$54 million, a decrease of 41.9%, compared to US$93 million for the six months ended June 30, 2019. The decrease was primarily driven by decreases in payroll, management fees and other operating expenses as a result of lower hotel occupancy.

Mall expenses for the six months ended June 30, 2020 were US$20 million, a decrease of 16.7%, compared to US$24 million for the six months ended June 30, 2019. The decrease was primarily driven by decreases in payroll and common area maintenance cost.

Food and beverage expenses for the six months ended June 30, 2020 were US$65 million, a decrease of 50.4%, compared to US$131 million for the six months ended June 30, 2019. The decrease was primarily driven by decreases in payroll, cost of sales and other operating expenses consistent with lower business volumes.

 

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Convention, ferry, retail and other expenses for the six months ended June 30, 2020 were US$41 million, a decrease of 53.9%, compared to US$89 million for the six months ended June 30, 2019. The decrease was primarily driven by a decrease in ferry expenses resulting from the closure of the ferry terminals in response to the COVID-19 Pandemic.

Provision for expected credit losses, net for the six months ended June 30, 2020 were US$9 million, compared to US$14 million for the six months ended June 30, 2019. The decrease was primarily due to decrease in provision for premium players driven by lower credit issuance.

General and administrative expenses were US$274 million for the six months ended June 30, 2020, a decrease of 20.1%, compared to US$343 million for the six months ended June 30, 2019. The decrease was primarily driven by decreases in marketing, payroll and property operating costs.

Corporate expenses were US$29 million for the six months ended June 30, 2020, a decrease of 56.1%, compared to US$66 million for the six months ended June 30, 2019. The decrease was primarily driven by a decrease in royalty fees due to decreased revenues for the operation of all properties.

Depreciation and amortization expenses were US$338 million for the six months ended June 30, 2020, a decrease of 7.1%, compared to US$364 million for the six months ended June 30, 2019. The decrease was primarily due to a decrease of US$52 million from the acceleration of depreciation in the prior year on certain assets to be replaced in conjunction with The Londoner Macao project, partially offset by the additions from The Grand Suites at Four Seasons and The Londoner Macao for those areas which were completed, as well as the addition of shuttle bus, limousine and gaming equipment.

Net foreign exchange gains for the six months ended June 30, 2020 were US$20 million and were primarily associated with U.S. dollar denominated debt. This is compared with net foreign exchange gains of US$12 million for the six months ended June 30, 2019.

Adjusted Property EBITDA

The following table summarizes information related to our segments for the periods indicated:

 

     Six months ended June 30,  
     2020     2019     Percent
Change
 
     (US$ in millions)  

The Venetian Macao

   $ (48   $ 697     (106.9 )% 

Sands Cotai Central

     (79     377       (121.0 )% 

The Parisian Macao

     (84     302       (127.8 )% 

The Plaza Macao

     10       168       (94.0 )% 

Sands Macao

     (32     83       (138.6 )% 

Ferry and other operations

     (10     (2     N.M.  
  

 

 

   

 

 

   

 

 

 

Total Adjusted Property EBITDA

   $ (243   $ 1,625     (115.0 )% 
  

 

 

   

 

 

   

 

 

 

 

N.M.—not meaningful

Adjusted property EBITDA for the six months ended June 30, 2020 decreased 115.0% to a loss of US$243 million, compared to an adjusted property EBITDA of US$1.63 billion for the six months ended June 30, 2019. The decrease was driven by the decline in revenue in all business categories as a result of the COVID-19 Pandemic described above. Management continues to focus on operational efficiencies and cost control measures throughout the gaming and non-gaming areas of our business.

 

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Interest Expense

The following table summarizes information related to interest expense for the periods indicated:

 

     Six months ended June 30,  
     2020     2019     Percent
Change
 
     (US$ in millions)  

Interest and other finance costs

   $ 124   $ 150     (17.3 )% 

Less: interest capitalized

     (8     (3     166.7
  

 

 

   

 

 

   

 

 

 

Interest expense, net

   $ 116   $ 147     (21.1 )% 
  

 

 

   

 

 

   

 

 

 

Interest expense, net of amounts capitalized, was US$116 million for the six months ended June 30, 2020, compared to US$147 million for the six months ended June 30, 2019. The decrease was primarily due to an increase of US$35 million benefit related to interest rate swaps on the US$5.5 billion of Senior Notes issued in August 2018. These interest rate swaps expire in August 2020. This benefit was partially offset by a total of US$6 million increase in interest expense from US$1.5 billion of Senior Notes issued in June 2020 and fundings from the revolving loan in the second quarter of 2020 repaid as of June 30, 2020.

Our weighted average interest rate for the six months ended June 30, 2020 was approximately 4.1%, compared to 5.3% for the six months ended June 30, 2019. As noted above, the decrease in the weighted average interest rate related to the impact of the interest rate swaps. The weighted average interest rates are calculated based on total interest expense (including the impact of the interest rate swaps, amortization of deferred financing costs, standby fees and other financing costs and interest capitalized) and total weighted average borrowings.

(Loss) Profit

Loss for the six months ended June 30, 2020 was US$716 million, compared to a profit of US$1.07 billion for the six months ended June 30, 2019.

Year ended December 31, 2019 compared to year ended December 31, 2018.

Net Revenues

Our net revenues consisted of the following for the periods indicated:

 

     Year ended December 31,  
     2019      2018      Percent
Change
 
     (US$ in millions)  

Casino

   $ 7,018    $ 6,816      3.0

Rooms

     731        734        (0.4 )% 

Mall

     531        507        4.7

Food and beverage

     298        304        (2.0 )% 

Convention, ferry, retail and other

     230        304        (24.3 )% 
  

 

 

    

 

 

    

 

 

 

Total net revenues

   $ 8,808    $ 8,665      1.7
  

 

 

    

 

 

    

 

 

 

Net revenues were US$8.81 billion for the year ended December 31, 2019, an increase of 1.7% compared to US$8.67 billion for the year ended December 31, 2018. Net revenues increased in the casino and mall business categories as we continued to enjoy market-leading visitation in Macao and focused on driving the high-margin mass market gaming business, while providing luxury amenities and high service levels to our VIP and premium players.

 

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Casino Revenues. Our net casino revenues for the year ended December 31, 2019 were US$7.02 billion, an increase of 3.0%, compared to US$6.82 billion for the year ended December 31, 2018. The increase was primarily attributable to an increase of US$148 million at The Plaza Macao driven by higher win percentage in VIP gaming as well as higher business volume in both VIP and mass gaming, and an increase of US$111 million at The Parisian Macao driven by higher win percentage and business volume in mass gaming. The following table summarizes the results of our casino activity:

 

     Year ended December 31,  
     2019     2018     Change  
     (US$ in millions)  

The Venetian Macao

      

Total net casino revenues

   $ 2,875   $ 2,829     1.6

Non-Rolling Chip drop

     9,275     9,068     2.3

Non-Rolling Chip win percentage

     26.2     24.7     1.5  pts 

Rolling Chip volume

     25,715     32,148     (20.0 )% 

Rolling Chip win percentage(i)

     3.29     3.55     (0.26 ) pts 

Slot handle

     3,952     3,303     19.6

Slot hold percentage

     4.8     4.6     0.2  pts 

Sands Cotai Central

      

Total net casino revenues

   $ 1,541   $ 1,622     (5.0 )% 

Non-Rolling Chip drop

     6,586     6,722     (2.0 )% 

Non-Rolling Chip win percentage

     22.7     21.4     1.3  pts 

Rolling Chip volume

     5,364     10,439     (48.6 )% 

Rolling Chip win percentage(i)

     3.36     3.59     (0.23 ) pts 

Slot handle

     4,107     4,811     (14.6 )% 

Slot hold percentage

     4.2     3.9     0.3  pts 

The Parisian Macao

      

Total net casino revenues

   $ 1,376   $ 1,265     8.8

Non-Rolling Chip drop

     4,522     4,323     4.6

Non-Rolling Chip win percentage

     23.1     21.1     2.0  pts 

Rolling Chip volume

     16,121     19,049     (15.4 )% 

Rolling Chip win percentage(i)

     3.43     3.19     0.24  pts 

Slot handle

     4,217     4,837     (12.8 )% 

Slot hold percentage

     3.7     2.9     0.8  pts 

The Plaza Macao

      

Total net casino revenues

   $ 650   $ 502     29.5

Non-Rolling Chip drop

     1,473     1,365     7.9

Non-Rolling Chip win percentage

     24.4     24.9     (0.5 ) pts 

Rolling Chip volume

     13,368     13,100     2.0

Rolling Chip win percentage(i)

     3.88     2.95     0.93  pts 

Slot handle

     518     565     (8.3 )% 

Slot hold percentage

     6.0     6.1     (0.1 ) pts 

Sands Macao

      

Total net casino revenues

   $ 576   $ 598     (3.7 )% 

Non-Rolling Chip drop

     2,634     2,565     2.7

Non-Rolling Chip win percentage

     18.3     18.4     (0.1 ) pts 

Rolling Chip volume

     4,605     5,705     (19.3 )% 

Rolling Chip win percentage(i)

     2.52     3.12     (0.60 ) pts 

Slot handle

     2,596     2,569     1.1

Slot hold percentage

     3.3     3.1     0.2  pts 

 

(i)

This compares to our expected Rolling Chip win percentage of 3.15% to 3.45% (calculated before discounts, commissions, deferring revenue associated with our loyalty programs and allocating casino revenues related to goods and services provided to patrons on a complimentary basis).

 

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Room Revenues. Room revenues for the year ended December 31, 2019 were US$731 million, a decrease of 0.4%, compared to US$734 million for the year ended December 31, 2018. The decrease was primarily driven by fewer rooms available at Sands Cotai Central due to the construction work related to The Londoner Macao Hotel room conversion program. The following table summarizes the results of our room activity:

 

     Year ended December 31,  
     2019     2018     Change  
     (US$ in millions, except average daily rate
and revenue per available room)
 

The Venetian Macao

      

Total room revenues

   $ 222   $ 223     (0.4 )% 

Occupancy rate

     95.9     95.9       pts 

Average daily rate (in US$)

     227     225     0.9

Revenue per available room (in US$)

     217     216     0.5

Sands Cotai Central

      

Total room revenues

   $ 320   $ 331     (3.3 )% 

Occupancy rate

     96.8     94.8     2.0  pts 

Average daily rate (in US$)

     160     157     1.9

Revenue per available room (in US$)

     155     149     4.0

The Parisian Macao

      

Total room revenues

   $ 130   $ 124     4.8

Occupancy rate

     97.2     96.3     0.9  pts 

Average daily rate (in US$)

     159     155     2.6

Revenue per available room (in US$)

     155     149     4.0

The Plaza Macao

      

Total room revenues

   $ 41   $ 39     5.1

Occupancy rate

     91.3     88.7     2.6  pts 

Average daily rate (in US$)

     332     323     2.8

Revenue per available room (in US$)

     303     286     5.9

Sands Macao

      

Total room revenues

   $ 18   $ 17     5.9

Occupancy rate

     99.8     98.6     1.2  pts 

Average daily rate (in US$)

     175     164     6.7

Revenue per available room (in US$)

     175     162     8.0

 

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Mall Revenues. Mall revenues for the year ended December 31, 2019 were US$531 million, an increase of 4.7%, compared to US$507 million for the year ended December 31, 2018. The increase was primarily driven by increased base rent from Shoppes at Venetian and increased turnover rent from Shoppes at Four Seasons. The following table summarizes the results of our mall activity:

 

     Year ended December 31,  
     2019     2018     Change  
     (US$ in millions, except per square foot amount)  

Shoppes at Venetian

      

Total mall revenues

   $ 254   $ 233     9.0

Mall gross leasable area (in square feet)

     812,938     813,376     (0.1 )% 

Occupancy

     91.4     90.3     1.1  pts 

Base rent per square foot (in US$)

     277     263     5.3

Tenant sales per square foot (in US$)(i)

     1,709     1,746     (2.1 )% 

Shoppes at Cotai Central(ii)

  

Total mall revenues

   $ 71   $ 69     2.9

Mall gross leasable area (in square feet)

     525,222     519,681     1.1

Occupancy

     90.1     91.5     (1.4 ) pts 

Base rent per square foot (in US$)

     107     108     (0.9 )% 

Tenant sales per square foot (in US$)(i)

     934     892     4.7

Shoppes at Parisian

      

Total mall revenues

   $ 53   $ 57     (7.0 )% 

Mall gross leasable area (in square feet)

     295,920     295,915       % 

Occupancy

     86.2     89.8     (3.6 ) pts 

Base rent per square foot (in US$)

     149     156     (4.5 )% 

Tenant sales per square foot (in US$)(i)

     785     649     21.0

Shoppes at Four Seasons

      

Total mall revenues

   $ 151   $ 145     4.1

Mall gross leasable area (in square feet)

     242,425     241,548     0.4

Occupancy

     95.0     99.0     (4.0 ) pts 

Base rent per square foot (in US$)

     544     460     18.3

Tenant sales per square foot (in US$)(i)

     5,478     4,373     25.3

 

Note:

This table excludes the results of our mall operations at Sands Macao.

(i)

Tenant sales per square foot reflect sales from tenants only after the tenant has been open for a period of 12 months.

(ii)

The Shoppes at Cotai Central will be rebranded to the Shoppes at Londoner and feature up to approximately 600,000 square feet of gross leasable area upon completion of all phases of Sands Cotai Central’s renovation, rebranding and expansion to The Londoner Macao.

Food and beverage revenues. Food and beverage revenues for the year ended December 31, 2019 were US$298 million, a decrease of 2.0%, compared to US$304 million for the year ended December 31, 2018. The decrease was primarily driven by lower business volume for banquet and beverage operations.

Convention, ferry, retail and other revenues. Convention, ferry, retail and other revenues for the year ended December 31, 2019 were US$230 million, a decrease of 24.3%, compared to US$304 million for the year ended December 31, 2018. The decrease was primarily driven by decreased business volume in ferry operation impacted by the Hong Kong-Zhuhai-Macao Bridge opening in October 2018 and the on-going situation in Hong Kong since June 2019, as well as the receipt of insurance proceeds during the year ended December 31, 2018, related to Typhoon Hato and Typhoon Mangkhut.

 

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Operating Expenses

Our operating expenses consisted of the following:

 

     Year ended December 31,  
     2019     2018     Percent
Change
 
     (US$ in millions)  

Casino

   $ 4,226   $ 4,216     0.2

Rooms

     190       185       2.7

Mall

     55       53       3.8

Food and beverage

     258       252       2.4

Convention, ferry, retail and other

     178       212       (16.0 )% 

Provision for expected credit losses, net

     24       9       166.7

General and administrative

     698       672       3.9

Corporate

     129       125       3.2

Pre-opening

     23       5       360.0

Depreciation and amortization

     706       655       7.8

Impairment loss on property and equipment

     65       —         100.0

Net foreign exchange losses

     (35     (4     775.0

Loss on disposal of property and equipment, investment properties and intangible assets

     16       131       (87.8 )% 
  

 

 

   

 

 

   

 

 

 

Total operating expenses

   $ 6,533   $ 6,511     0.3
  

 

 

   

 

 

   

 

 

 

Operating expenses were US$6.53 billion for the year ended December 31, 2019, largely consistent compared to US$6.51 billion for the year ended December 31, 2018.

Casino expenses for the year ended December 31, 2019 were US$4.23 billion, largely consistent compared to US$4.22 billion for the year ended December 31, 2018.

Room expenses for the year ended December 31, 2019 were US$190 million, an increase of 2.7%, compared to US$185 million for the year ended December 31, 2018. The increase was primarily driven by increases in payroll and other operating expenses on amenities to enhance guest experience.

Mall expenses for the year ended December 31, 2019 were US$55 million, an increase of 3.8%, compared to US$53 million for the year ended December 31, 2018. The increase was primarily driven by increases in payroll and common area maintenance cost.

Food and beverage expenses for the year ended December 31, 2019 were US$258 million, an increase of 2.4%, compared to US$252 million for the year ended December 31, 2018. The increase was primarily driven by an increase in payroll expenses.

Convention, ferry, retail and other expenses for the year ended December 31, 2019    were US$178 million, a decrease of 16.0% compared to US$212 million for the year ended December 31, 2018. The decrease was primarily driven by decreases in repairs and maintenance expenses and other operating expenses for our ferry operation as a result of reduced sailings during the year.

Provision for expected credit losses, net for the year ended December 31, 2019 were US$24 million, an increase of 166.7% compared to US$9 million for the year ended December 31, 2018. The increase was primarily driven by increased provision for premium players.

General and administrative expenses were US$698 million for the year ended December 31, 2019, an increase of 3.9% compared to US$672 million for the year ended December 31, 2018. The increase was primarily driven by increases in payroll and related costs and information technology-related expenses.

 

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Corporate expenses were US$129 million for the year ended December 31, 2019, an increase of 3.2% compared to US$125 million for the year ended December 31, 2018. The increase was primarily driven by an increase in royalty fees due to increased revenues for the operation of The Venetian Macao and The Plaza Macao.

Pre-opening expenses were US$23 million for the year ended December 31, 2019, compared to US$5 million for the year ended December 31, 2018. The increase was primarily driven by branding campaign fees for The Londoner Macao.

Depreciation and amortization expense was US$706 million for the year ended December 31, 2019, an increase of 7.8%, compared to US$655 million for the year ended December 31, 2018. The increase was primarily due to an increase of US$20 million from the acceleration of depreciation on certain assets to be replaced in conjunction with The Londoner Macao project, as well as driven by the addition of gaming equipment.

Impairment loss on property and equipment of US$65 million for the year ended December 31, 2019 resulted from the decrease in volume of passengers in our ferry operations.

Net foreign exchange gains for the year ended December 31, 2019 were US$35 million and were primarily associated with U.S. dollar denominated debt. This compared with net foreign exchange gains of US$4 million for the year ended December 31, 2018.

Loss on disposal of property and equipment, investment properties and intangible assets was US$16 million for the year ended December 31, 2019, compared with a loss of US$131 million for the year ended December 31, 2018. The decrease was primarily due to a loss on asset disposals related to the preparation of the construction site for The Grand Suites at Four Seasons in 2018.

Adjusted Property EBITDA

The following table summarizes information related to our segments for the periods indicated:

 

     Year ended December 31,  
     2019     2018      Percent
Change
 
     (US$ in millions)  

The Venetian Macao

   $ 1,407   $ 1,378      2.1

Sands Cotai Central

     726       759        (4.3 )% 

The Parisian Macao

     544       484        12.4

The Plaza Macao

     345       262        31.7

Sands Macao

     175       178        (1.7 )% 

Ferry and other operations

     (4     18        (122.2 )% 
  

 

 

   

 

 

    

 

 

 

Total Adjusted Property EBITDA

   $ 3,193   $ 3,079      3.7
  

 

 

   

 

 

    

 

 

 

Adjusted property EBITDA for the year ended December 31, 2019 increased 3.7% to US$3.19 billion, compared to US$3.08 billion for the year ended December 31, 2018. The increase was driven by the revenue increases in casino and mall business categories. The management team continues to focus on operational efficiencies and cost control measures throughout both the gaming and non-gaming areas of the business, maintaining a market-leading Adjusted Property EBITDA.

 

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Interest Expense

The following table summarizes information related to interest expense for the periods indicated:

 

     Year ended December 31,  
     2019     2018     Percent
Change
 
     (US$ in millions)  

Interest and other finance costs

   $ 289   $ 229     26.2

Less: interest capitalized

     (9     (4     125.0
  

 

 

   

 

 

   

 

 

 

Interest expense, net

   $ 280   $ 225     24.4
  

 

 

   

 

 

   

 

 

 

Interest expense, net of amounts capitalized, was US$280 million for the year ended December 31, 2019, compared to US$225 million for the year ended December 31, 2018. The increase was primarily due to a US$60 million increase in interest and other finance costs, primarily driven by a US$168 million increase in interest expense of Senior Notes issued in August 2018, partially offset by an US$18 million increase in net interest income related to interest rate swaps and an US$85 million decrease in interest expense for the 2016 VML Credit Facility repaid in August 2018. Our weighted average interest rate for the year ended December 31, 2019 was approximately 5.1%, compared to 4.6% for the year ended December 31, 2018. The weighted average interest rates are calculated based on total interest expense (including amortization of deferred financing costs, standby fees and other financing costs and interest capitalized) and total weighted average borrowings.

Profit

Profit for the year ended December 31, 2019 was US$2.03 billion, an increase of 8.4%, compared to US$1.87 billion for the year ended December 31, 2018.

Year ended December 31, 2018 compared to year ended December 31, 2017

Net Revenues

Our net revenues consisted of the following:

 

     Year ended December 31,  
     2018      2017      Percent
Change
 
     (US$ in millions)  

Casino

   $ 6,816    $ 5,880      15.9

Rooms

     734        651        12.7

Mall

     507        479        5.8

Food and beverage

     304        292        4.1

Convention, ferry, retail and other

     304        284        7.0
  

 

 

    

 

 

    

 

 

 

Total net revenues

   $ 8,665    $ 7,586      14.2
  

 

 

    

 

 

    

 

 

 

Net revenues were US$8.67 billion for the year ended December 31, 2018, an increase of 14.2%, compared to US$7.59 billion for the year ended December 31, 2017. Net revenues increased in all business categories, mainly driven by an increase in visitation as well as growth in the overall Macao gaming market. We continued to enjoy market-leading visitation in Macao and focused on driving the high-margin mass market gaming business, while providing luxury amenities and high service levels to our VIP and premium players.

Casino Revenues. Our net casino revenues for the year ended December 31, 2018 were US$6.82 billion, an increase of 15.9%, compared to US$5.88 billion for the year ended December 31, 2017. The increase was mainly

 

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attributable to revenue increases across all properties, especially at The Venetian Macao, as a result of strong growth in both the VIP and mass segments. Strong results in our properties on Cotai continue to demonstrate the competitive advantage of our integrated resort business model. The following table summarizes the results of our casino activity:

 

     Year ended December 31,  
     2018     2017     Change  
     (US$ in millions)  

The Venetian Macao

      

Total net casino revenues

   $ 2,829   $ 2,362     19.8

Non-Rolling Chip drop

     9,068     7,399     22.6

Non-Rolling Chip win percentage

     24.7     25.2     (0.5 ) pts 

Rolling Chip volume

     32,148     26,239     22.5

Rolling Chip win percentage(i)

     3.55     3.34     0.21  pts 

Slot handle

     3,303     2,929     12.8

Slot hold percentage

     4.6     5.3     (0.7 ) pts 

Sands Cotai Central

      

Total net casino revenues

   $ 1,622   $ 1,433     13.2

Non-Rolling Chip drop

     6,722     5,996     12.1

Non-Rolling Chip win percentage

     21.4     20.7     0.7  pts 

Rolling Chip volume

     10,439     10,621     (1.7 )% 

Rolling Chip win percentage(i)

     3.59     3.09     0.50  pts 

Slot handle

     4,811     4,802     0.2

Slot hold percentage

     3.9     4.1     (0.2 ) pts 

The Parisian Macao

      

Total net casino revenues

   $ 1,265   $ 1,120     12.9

Non-Rolling Chip drop

     4,323     3,973     8.8

Non-Rolling Chip win percentage

     21.1     19.6     1.5  pts 

Rolling Chip volume

     19,049     18,275     4.2

Rolling Chip win percentage(i)

     3.19     3.14     0.05  pts 

Slot handle

     4,837     3,729     29.7

Slot hold percentage

     2.9     3.3     (0.4 ) pts 

The Plaza Macao

      

Total net casino revenues

   $ 502   $ 391     28.4

Non-Rolling Chip drop

     1,365     1,284     6.3

Non-Rolling Chip win percentage

     24.9     22.7     2.2  pts 

Rolling Chip volume

     13,100     10,040     30.5

Rolling Chip win percentage(i)

     2.95     2.59     0.36  pts 

Slot handle

     565     436     29.6

Slot hold percentage

     6.1     7.4     (1.3 ) pts 

Sands Macao

      

Total net casino revenues

   $ 598   $ 574     4.2

Non-Rolling Chip drop

     2,565     2,457     4.4

Non-Rolling Chip win percentage

     18.4     19.0     (0.6 ) pts 

Rolling Chip volume

     5,705     4,309     32.4

Rolling Chip win percentage(i)

     3.12     2.79     0.33  pts 

Slot handle

     2,569     2,420     6.2

Slot hold percentage

     3.1     3.3     (0.2 ) pts 

 

(i)

This compares to our expected Rolling Chip win percentage of 3.15% to 3.45% (calculated before discounts, commissions, deferring revenue associated with our loyalty program and allocating casino revenues related to goods and services provided to patrons on a complimentary basis).

 

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Room Revenues. Room revenues for the year ended December 31, 2018 were US$734 million, an increase of 12.7%, compared to US$651 million for the year ended December 31, 2017. The increase was primarily driven by increased demand and higher average daily rate at The Venetian Macao and Sands Cotai Central. During the year ended December 31, 2018, there were approximately 18% fewer average rooms available at The Parisian Macao compared to the year ended December 31, 2017, due to the construction work that was underway to combine and convert standard rooms to suites. The following table summarizes the results of our room activity:

 

     Year ended December 31,  
     2018     2017     Change  
     (US$ in millions, except average daily rate and
revenue per available room)
 

The Venetian Macao

      

Total room revenues

   $ 223   $ 179     24.6

Occupancy rate

     95.9     91.4     4.5  pts 

Average daily rate (in US$)

     225     214     5.1

Revenue per available room (in US$)

     216     196     10.2

Sands Cotai Central

      

Total room revenues

   $ 331   $ 291     13.7

Occupancy rate

     94.8     86.6     8.2  pts 

Average daily rate (in US$)

     157     149     5.4

Revenue per available room (in US$)

     149     129     15.5

The Parisian Macao

      

Total room revenues

   $ 124   $ 128     (3.1 )% 

Occupancy rate

     96.3     90.4     5.9  pts 

Average daily rate (in US$)

     155     141     9.9

Revenue per available room (in US$)

     149     128     16.4

The Plaza Macao

      

Total room revenues

   $ 39   $ 34     14.7

Occupancy rate

     88.7     82.1     6.6  pts 

Average daily rate (in US$)

     323     343     (5.8 )% 

Revenue per available room (in US$)

     286     281     1.8

Sands Macao

      

Total room revenues

   $ 17   $ 19     (10.5 )% 

Occupancy rate

     98.6     97.7     0.9  pts 

Average daily rate (in US$)

     164     188     (12.8 )% 

Revenue per available room (in US$)

     162     184     (12.0 )% 

 

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Mall Revenues. Mall revenues for the year ended December 31, 2018 increased 5.8%, to US$507 million, compared to US$479 million for the year ended December 31, 2017. The increase was primarily driven by increased turnover fees from Shoppes at Four Seasons, Shoppes at Venetian and Shoppes at Cotai Central, as well as the additional retail space available at Shoppes at Cotai Central. The following table summarizes the results of our mall activity on Cotai:

 

     Year ended December 31,  
     2018(i)     2017     Change  
     (US$ in millions, except per square foot
amount)
 

Shoppes at Venetian

      

Total mall revenues

   $ 233   $ 219     6.4

Mall gross leasable area (in square feet)

     813,376       786,429     3.4

Occupancy

     90.3     97.2     (6.9 ) pts 

Base rent per square foot (in US$)

     263     247     6.5

Tenant sales per square foot (in US$)(ii)

     1,746     1,389     25.7

Shoppes at Cotai Central(iii)

      

Total mall revenues

   $ 69   $ 63     9.5

Mall gross leasable area (in square feet)

     519,681       424,309     22.5

Occupancy

     91.5     93.5     (2.0 ) pts 

Base rent per square foot (in US$)

     108     113     (4.4 )% 

Tenant sales per square foot (in US$)(ii)

     892     744     19.9

Shoppes at Parisian

      

Total mall revenues

   $ 57   $ 66     (13.6 )% 

Mall gross leasable area (in square feet)

     295,915       300,218     (1.4 )% 

Occupancy

     89.8     93.4     (3.6 ) pts 

Base rent per square foot (in US$)

     156     218     (28.4 )% 

Tenant sales per square foot (in US$)(ii)

     649     574     13.1

Shoppes at Four Seasons

      

Total mall revenues

   $ 145   $ 131     10.7

Mall gross leasable area (in square feet)

     241,548       257,859     (6.3 )% 

Occupancy

     99.0     99.6     (0.6 ) pts 

Base rent per square foot (in US$)

     460     456     0.9

Tenant sales per square foot (in US$)(ii)

     4,373     3,500     24.9

 

(i)

Excludes the results of our mall operations at Sands Macao.

(ii)

Tenant sales per square foot reflects sales from tenants only after the tenant has been opened for a period of 12 months.

(iii)

The Shoppes at Cotai Central will be rebranded to the Shoppes at Londoner and feature up to approximately 600,000 square feet of gross leasable area upon completion of Sands Cotai Central’s renovation, rebranding and expansion to The Londoner Macao.

Food and beverage revenues. Food and beverage revenues for the year ended December 31, 2018 increased 4.1%, to US$304 million, compared to US$292 million for the year ended December 31, 2017. The increase was primarily driven by an increase in property visitation.

Convention, ferry, retail and other revenues. Convention, ferry, retail and other revenues for the year ended December 31, 2018 were US$304 million, an increase of 7.0%, compared to US$284 million for the year ended December 31, 2017. The increase was primarily attributable to an insurance recovery for business interruption caused by Typhoons Hato and Mangkhut.

 

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Operating Expenses

Our operating expenses consisted of the following:

 

     Year ended December 31,  
     2018     2017      Percent
Change
 
     (US$ in millions)  

Casino

   $ 4,216   $ 3,646      15.6

Rooms

     185       176        5.1

Mall

     53       53        —  

Food and beverage

     252       241        4.6

Convention, ferry, retail and other

     212       209        1.4

Provision for credit losses, net

     9       4        125.0

General and administrative

     672       657        2.3

Corporate

     125       121        3.3

Pre-opening

     5       7        (28.6 )% 

Depreciation and amortization

     655       676        (3.1 )% 

Net foreign exchange (gains) losses

     (4     11        (136.4 )% 

Loss on disposal of property and equipment, investment properties and intangible assets

     131       12        991.7
  

 

 

   

 

 

    

 

 

 

Total operating expenses

   $ 6,511   $ 5,813      12.0
  

 

 

   

 

 

    

 

 

 

Operating expenses were US$6.51 billion for the year ended December 31, 2018, an increase of 12.0%, compared to US$5.81 billion for the year ended December 31, 2017. The increase in operating expenses was primarily due to increases of business volumes across all business categories.

Casino expenses for the year ended December 31, 2018 were US$4.22 billion, an increase of 15.6%, compared to US$3.65 billion for the year ended December 31, 2017. The increase was primarily due an increase in gaming taxes as a result of increased casino revenues.

Room expenses for the year ended December 31, 2018 were US$185 million, an increase of 5.1%, compared to US$176 million for the year ended December 31, 2017. The increase was mainly driven by increases in payroll and other operating expenses as a result of higher hotel occupancy.

Food and beverage expenses for the year ended December 31, 2018 were US$252 million, an increase of 4.6%, compared to US$241 million for the year ended December 31, 2017. The increase was primarily driven by increases in cost of sales and payroll consistent with higher business volumes.

Convention, ferry, retail and other expenses for the year ended December 31, 2018 were US$212 million, an increase of 1.4% compared to US$209 million for the year ended December 31, 2017. The increase was primarily driven by higher fuel costs for our ferry operations.

Provision for credit losses, net for the year ended December 31, 2018 were US$9 million, an increase of 125.0% compared to US$4 million for the year ended December 31, 2017. The increase was primarily driven by increased provision for premium direct players.

General and administrative expenses were US$672 million for the year ended December 31, 2018, an increase of 2.3% compared to US$657 million for the year ended December 31, 2017. The increase was primarily driven by increase in payroll and related costs and information technology-related expenses.

Corporate expenses were US$125 million for the year ended December 31, 2018, an increase of 3.3% compared to US$121 million for the year ended December 31, 2017. The increase was primarily driven by an

 

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increase in royalty fees due to increased revenues for the operation of The Venetian Macao, The Plaza Macao and Sands Macao.

Depreciation and amortization expense was US$655 million for the year ended December 31, 2018, a decrease of 3.1%, compared to US$676 million for the year ended December 31, 2017. During the year ended December 31, 2017, the Group completed an evaluation of the estimated useful lives of its property and equipment and investment properties and determined changes to the useful lives of certain assets were appropriate. These changes in estimated useful lives of the assets were accounted for as changes in accounting estimates beginning on July 1, 2017. The impact of this change for the year ended December 31, 2018 was a decrease in depreciation expense of US$82 million. The aforementioned decrease was partially offset by a US$70 million increase due to the acceleration of depreciation on certain assets to be disposed of in conjunction with The Londoner Macao project.

Net foreign exchange gains for the year ended December 31, 2018 were US$4 million and were primarily associated with U.S. dollar denominated debt. This compared with net foreign exchange losses of US$11 million for the year ended December 31, 2017.

Loss on disposal of property and equipment, investment properties and intangible assets was US$131 million for the year ended December 31, 2018, compared with a loss of US$12 million for the year ended December 31, 2017. The increase was primarily due to US$128 million of assets disposed of related to The Grand Suites at Four Seasons.

Adjusted Property EBITDA

The following table summarizes information related to our segments for the periods indicated:

 

     Year ended December 31,  
     2018      2017      Percent
Change
 
     (US$ in millions)  

The Venetian Macao

   $ 1,378    $ 1,137      21.2

Sands Cotai Central

     759        633        19.9

The Parisian Macao

     484        412        17.5

The Plaza Macao

     262        233        12.4

Sands Macao

     178        174        2.3

Ferry and other operations

     18        22        (18.2 )% 
  

 

 

    

 

 

    

 

 

 

Total Adjusted Property EBITDA

   $ 3,079    $ 2,611      17.9
  

 

 

    

 

 

    

 

 

 

Adjusted Property EBITDA for the year ended December 31, 2018 increased 17.9% to US$3.08 billion, compared to US$2.61 billion for the year ended December 31, 2017. The increase was driven by the revenue increases in all business categories. The management team continues to focus on operational efficiencies and cost control measures throughout both the gaming and non-gaming areas of the business, maintaining a market-leading Adjusted Property EBITDA.

 

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Interest Expense

The following table summarizes information related to interest expense for the periods indicated:

 

     Year ended December 31,  
     2018     2017     Percent
Change
 
     (US$ in millions)  

Interest and other finance costs

   $ 229   $ 155     47.7

Less: interest capitalized

     (4     (2     100.0
  

 

 

   

 

 

   

 

 

 

Interest expense, net

   $ 225   $ 153     47.1
  

 

 

   

 

 

   

 

 

 

Interest expense, net of amounts capitalized, was US$225 million for the year ended December 31, 2018, compared to US$153 million for the year ended December 31, 2017. The increase was primarily due to a US$74 million increase in interest and other finance costs, primarily driven by a US$112 million increase in interest expense of Senior Notes issued in August 2018, partially offset by US$9 million of net interest income related to interest rate swaps and a US$32 million decrease in interest expense of the 2016 VML Credit Facility repaid in August 2018. Our weighted average interest rate for the year ended December 31, 2018 was approximately 4.6%, compared to 3.3% for the year ended December 31, 2017. The weighted average interest rates are calculated based on total interest expense (including amortization of deferred financing costs, standby fees and other financing costs and interest capitalized) and total weighted average borrowings.

Profit

Profit for the year ended December 31, 2018 was US$1.87 billion, an increase of 17.0%, compared to US$1.60 billion for the year ended December 31, 2017.

Reconciliation of Non-IFRS Financial Measures

The following table presents a reconciliation of Adjusted Property EBITDA to profit attributable to equity holders of the Company for the periods presented:

 

    Year ended December 31,     Six months ended
June 30,
 
    2017     2018     2019     2019     2020  
    (US$ in millions)  

Profit (loss) attributable to equity holders of the Company

  $ 1,603   $ 1,875   $ 2,033   $ 1,067   $ (716

Income tax expense (benefit)

    22     (7     —         (6     —    

Loss on modification or early retirement of debt

    —         81     —         —         —    

Interest expense, net of amount capitalized

    153     225     280     147     116

Interest income

    (5     (20     (38     (21     (9

Loss on disposal of property and equipment, investment properties and intangible assets

    12     131     16     3       7  

Impairment loss on property and equipment

    —         —         65     —         —    

Net foreign exchange losses (gains)

    11     (4     (35     (12     (20

Depreciation and amortization

    676     655     706     364     338

Pre-opening expense

    7     5     23     10     5

Corporate expense

    120     125     129     66     28

Share-based compensation, net of amount capitalized

    12     13     14     7     8
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Property EBITDA

  $ 2,611   $ 3,079   $ 3,193   $ 1,625   $ (243
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Additional Information Regarding our Retail Mall Operations

The following tables summarize the results of our mall operations on Cotai for the six months ended June 30, 2020 and June 30, 2019:

 

     Shoppes at
Venetian
    Shoppes at Four
Seasons
    Shoppes at
Cotai Central
    Shoppes at
Parisian
    Total  
     (US$ in millions)  

For the six months ended June 30, 2020

          

Mall revenues:

          

Minimum rents(i)

   $ 97   $ 60   $ 19   $ 18   $ 194

Overage rents

     1     1     2     —         4

Rent concessions(ii)

     (68     (40     (14     (13     (135
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total overage rents and rent concessions

     (67     (39     (12     (13     (131

CAM, levies and direct recoveries

     17     5     9     5     36

Total mall revenues

     47     26     16     10     99

Mall operating expenses:

          

Common area maintenance

     6     2     3     2     13

Marketing and other direct operating expenses

     3     1     1     2     7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mall operating expenses

     9     3     4     4     20

Property taxes(iii)

     1     —         —         —         1

Provision for credit losses

     1     —         1     1     3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mall-related expenses(iv)

   $ 11   $ 3   $ 5   $ 5   $ 24

For the six months ended June 30, 2019

          

Mall revenues:

          

Minimum rents(i)

   $ 96   $ 55   $ 19   $ 20   $ 190

Overage rents

     5     2     4     —         11

CAM, levies and direct recoveries

     17     5     9     6     37
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total mall revenues

     118     62     32     26     238

Mall operating expenses:

          

Common area maintenance

     8     3     4     3     18

Marketing and other direct operating expenses

     3     1     1     2     7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mall operating expenses

     11     4     5     5     25

Recovery of credit losses

     —         —         —         (1     (1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mall-related expenses(iv)

   $ 11   $ 4   $ 5   $ 4   $ 24

 

Note: These tables exclude the results of our mall operations at Sands Macao.

(i)

Minimum rents include base rents and straight-line adjustments of base rents.

(ii)

Rent concessions were provided to tenants as a result of the COVID-19 Pandemic and the impact on mall operations.

(iii)

Commercial property that generates rental income is exempt from property tax for the first six years for newly constructed buildings in Cotai. Each property is also eligible to obtain an additional six-year exemption, provided certain qualifications are met. To date, The Venetian Macao, The Plaza Macao, Sands Cotai Central and The Parisian Macao have obtained a second exemption. The exemption for The Venetian Macao and The Plaza Macao expired in August 2019 and August 2020, respectively, and the exemption for Sands Cotai Central and The Parisian Macao will be expiring in December 2027 and September 2028, respectively.

 

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(iv)

Mall-related expenses consist of common area maintenance (“CAM”), marketing fees and other direct operating expenses, property taxes and provision for credit losses, but excludes depreciation and amortization and general and administrative costs.

The following tables summarize the results of our mall operations on Cotai for the years ended December 31, 2019, 2018 and 2017:

 

     Shoppes at
Venetian
     Shoppes at Four
Seasons
     Shoppes at
Cotai Central
     Shoppes at
Parisian
     Total  
     (US$ in millions)  

For the year ended December 31, 2019

              

Mall revenues:

              

Minimum rents(i)

   $ 194    $ 110    $ 39    $ 37    $ 380

Overage rents

     26      31      14      3      74

CAM, levies and direct recoveries

     34      10      18      13      75
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mall revenues

     254      151      71      53      529

Mall operating expenses:

              

Common area maintenance

     16      6      8      6      36

Marketing and other direct operating expenses

     8      3      3      5      19
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mall operating expenses

     24      9      11      11      55

Property taxes(ii)

     1      —          —          —          1

Provision for doubtful accounts

     —          1      —          —          1
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mall-related expenses(iii)

   $ 25    $ 10    $ 11    $ 11    $ 57

For the year ended December 31, 2018

              

Mall revenues:

              

Minimum rents(i)

   $ 180    $ 110    $ 38    $ 42    $ 370

Overage rents

     21      25      14      3      63

CAM, levies and direct recoveries

     32      10      17      12      71
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mall revenues

     233      145      69      57      504

Mall operating expenses:

              

Common area maintenance

     15      6      7      6      34

Marketing and other direct operating expenses

     9      3      3      4      19
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mall operating expenses

     24      9      10      10      53

Provision for doubtful accounts

     —          —          1      1      2
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mall-related expenses(iii)

   $ 24    $ 9    $ 11    $ 11    $ 55

For the year ended December 31, 2017

              

Mall revenues:

              

Minimum rents(i)

   $ 175    $ 113    $ 39    $ 52    $ 379

Overage rents

     12      8      5      2      27

CAM, levies and direct recoveries

     32      10      19      12      73
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mall revenues

     219      131      63      66      479

Mall operating expenses:

              

Common area maintenance

     15      5      7      6      33

Marketing and other direct operating expenses

     8      4      3      5      20
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mall operating expenses

     23      9      10      11      53

Provision for doubtful accounts

     —          —          1      2      3
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mall-related expenses(iii)

   $ 23    $ 9    $ 11    $ 13    $ 56

 

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Note: These tables exclude the results of our mall operations at Sands Macao.

(i)

Minimum rents include base rents and straight-line adjustments of base rents.

(ii)

Commercial property that generates rental income is exempt from property tax for the first six years for newly constructed buildings in Cotai. Each property is also eligible to obtain an additional six-year exemption, provided certain qualifications are met. To date, The Venetian Macao, The Plaza Macao, Sands Cotai Central and The Parisian Macao have obtained a second exemption. The second exemption for The Venetian Macao and The Plaza Macao expired in August 2019 and August 2020, respectively, and the exemption for Sands Cotai Central and The Parisian Macao, will be expiring in December 2027 and September 2028, respectively.

(iii)

Mall-related expenses consist of CAM, marketing fees and other direct operating expenses, property taxes and provision for credit losses, but exclude depreciation and amortization and general and administrative costs.

It is common in the mall operating industry for companies to disclose mall net operating income (“NOI”) as a useful supplemental measure of a mall’s operating performance. Because NOI excludes general and administrative expenses, interest expense, impairment losses, depreciation and amortization, gains and losses from property dispositions, allocations to noncontrolling interests and provision for income taxes, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact on operations from trends in occupancy rates, rental rates and operating costs.

In the tables above, we believe taking total mall revenues less mall-related expenses provides an operating performance measure for our malls. Other mall operating companies may use different methodologies for deriving mall-related expenses. As such, this calculation may not be comparable to the NOI of other mall operating companies.

Taxation

According to the gaming subconcession granted by the Macao government and the relevant legislation, we are required to pay a special gaming tax of 35% on gross gaming revenues. We are also required to contribute 4% of gross gaming revenues to utilities designated by the Macao government, a portion of which must be used for promotion of tourism in Macao.

In addition, we are subject to a 12% complementary tax on profit before income tax from gaming activities. In October 2013, we received an extension of our exemption from this complementary tax on gaming profits through the end of 2018. In August 2018, we were granted an additional extension through June 26, 2022.

We are also subject to a 12% complementary tax on dividend distributions to our shareholders from gaming profits. In May 2014, we entered into an agreement with the Macao government that requires us to make fixed annual payments in lieu of paying this 12% tax (“Shareholder Dividend Tax Agreement”) through the end of 2018. In April 2019, VML entered into another Shareholder Dividend Tax Agreement with the Macao government for an extension of the same arrangement through June 26, 2022, to correspond to the Macao complementary tax exemption on its gaming activities.

For additional details, see Note 2(q) and Note 9 to our audited consolidated financial statements included elsewhere in this prospectus.

 

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Liquidity and Capital Resources

Capital Resources

We fund our operations through cash generated from our operations and our debt financing. As of June 30, 2020, we held cash and cash equivalents of US$1.61 billion. Such cash and cash equivalents were primarily held in HK$ and US$.

On June 4, 2020, we completed a private offering of US$800 million Outstanding 2026 Notes and US$700 million Outstanding 2030 Notes, in a transaction exempt from the registration under the Securities Act. The net proceeds to us from the issuance of the Outstanding Notes were approximately US$1.48 billion, after deducting the discounts of the initial purchasers and other offering expenses payable by us. We will use the net proceeds from the offering of the Outstanding Notes for incremental liquidity and general corporate purposes.

As of June 30, 2020, the Group had total liquidity of US$3.63 billion, consisting of US$1.61 billion of total cash and cash equivalents and US$2.02 billion of available borrowing capacity under the 2018 SCL Revolving Facility. The Group believes it will be able to support its continuing operations, complete the major construction projects that are underway, and respond to the current COVID-19 Pandemic challenges. The Group has taken various mitigating measures to manage through the current environment, including a cost and capital expenditure reduction program to minimize cash outflow of non-essential items. On April 17, 2020, the Company announced that the Board resolved not to recommend the payment of a final dividend in respect of the year ended December 31, 2019.

For further information on our capital structure, the types of capital instruments we use and our currency and interest rate structure, see Note 14(c), Note 19, Note 23, Note 29(a)(iii) and Note 29(b) to our audited consolidated financial statements included elsewhere in this prospectus.

Cash Flows—Summary

Our cash flows consisted of the following for the periods indicated:

 

     Year Ended December 31,     Six Months Ended June 30,  
     2017     2018     2019     2019     2020  
     (US$ in millions)  

Net cash generated from operating activities

   $ 2,626   $ 3,049   $ 2,812   $ 1,486   $ (644

Net cash used in investing activities

     (461     (513     (715     (201     (561

Net cash (used in) from financing activities

     (2,207     (1,099     (2,312     (2,178     328
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (42     1,437     (215     (893     (877

Cash and cash equivalents at beginning of period

     1,284     1,239     2,676     2,676     2,471

Effect of exchange rate on cash and cash equivalents

     (3     —         10     2     (2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 1,239   $ 2,676   $ 2,471   $ 1,785   $ 1,592
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash Flows—Operating Activities

We derive most of our operating cash flows from our casino, mall and hotel operations. Table games play at our properties is conducted on a cash and credit basis, while slot machine play is primarily conducted on a cash basis. Our rooms, food and beverage and other non-gaming revenues are conducted primarily on a cash basis or as a trade receivable, resulting in operating cash flows being generally affected by changes in operating income and accounts receivable.

 

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Net cash used in operating activities for the six months ended June 30, 2020 was US$644 million, compared to US$1.49 billion of net cash generated from operating activities for the six months ended June 30, 2019. We derive most of our operating cash flows from our casino, mall and hotel operations. The decrease in net cash generated from operating activities of US$2.13 billion was primarily attributable to the impact of the COVID-19 Pandemic on our operations, which significantly reduced visitation to our properties and significantly decreased operating income during the first six months of 2020 as described above. The COVID-19 Pandemic also impacted our working capital, which was a cash outflow during the six months ended June 30, 2020 as the amount of receivables collected was less than the settlement of operating accrued liabilities and a reduction to outstanding chips.

Net cash generated from operating activities for the year ended December 31, 2019 decreased 7.8% to US$2.81 billion, compared to US$3.05 billion for the year ended December 31, 2018. The decrease in net cash generated from operating activities was primarily attributable to a lower benefit from our working capital accounts, partially offset by an increase in operating income.

Net cash generated from operating activities for the year ended December 31, 2018 increased 16.1% to US$3.05 billion, compared to US$2.63 billion for the year ended December 31, 2017. The increase in net cash generated from operating activities was primarily attributable to the increase in operating income, partially offset by a lower benefit from our working capital accounts.

Cash Flows—Investing Activities

Net cash used in investing activities for the six months ended June 30, 2020 was US$561 million and was primarily attributable to capital expenditures for the major development projects. Capital expenditures for the six months ended June 30, 2020, totaled US$571 million, include US$368 million for Sands Cotai Central related primarily to The Londoner Macao, US$127 million for The Plaza Macao related primarily to The Grand Suites at Four Seasons, US$66 million for The Venetian Macao and US$10 million for our other operations, mainly at The Parisian Macao and Sands Macao.

Net cash used in investing activities for the six months ended June 30, 2019 was US$201 million and was primarily attributable to capital expenditures for development projects, as well as maintenance capital spending. Capital expenditures for the six months ended June 30, 2019, totaled US$225 million, included US$107 million for Sands Cotai Central related primarily to The Londoner Macao, US$59 million for The Plaza Macao related primarily to the The Grand Suites at Four Seasons, US$38 million for The Venetian Macao, respectively, and US$21 million for our other operations, mainly at The Parisian Macao and Sands Macao.

Net cash used in investing activities for the year ended December 31, 2019 was US$715 million and was primarily attributable to capital expenditures for development projects, as well as maintenance capital spending. Capital expenditures for the year ended December 31, 2019, totaled US$754 million, including US$296 million for The Plaza Macao, primarily related to The Grand Suites at Four Seasons, US$276 million for Sands Cotai Central, primarily related to The Londoner Macao project, US$131 million for The Venetian Macao and US$51 million for our other operations, mainly at The Parisian Macao and Sands Macao.

Net cash used in investing activities for the year ended December 31, 2018 was US$513 million and was primarily attributable to capital expenditures for development projects, as well as maintenance capital spending. Capital expenditures for the year ended December 31, 2018, totaled US$532 million, including US$179 million, US$130 million and US$130 million for construction and development activities at The Venetian Macao, Sands Cotai Central and The Parisian Macao, respectively, and US$93 million for projects mainly at The Plaza Macao and Sands Macao.

Net cash used in investing activities for the year ended December 31, 2017 was US$461 million and was primarily attributable to capital expenditures for development projects, as well as maintenance capital spending.

 

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Capital expenditures for the year ended December 31, 2017, totaled US$477 million, including US$204 million for construction activities at The Parisian Macao, and US$273 million for our operations, mainly at The Venetian Macao, Sands Cotai Central, The Plaza Macao and Sands Macao.

Cash Flows—Financing Activities

Net cash from financing activities for the six months ended June 30, 2020 was US$328 million, which was primarily attributable to US$1.50 billion in Senior Notes issuance, partially offset by US$1.03 billion in dividend payments and US$120 million in interest payment.

Net cash used in financing activities for the six months ended June 30, 2019 was US$2.18 billion, which was primarily attributable to US$2.05 billion in dividend payments and US$140 million in interest payment.

Net cash used in financing activities for the year ended December 31, 2019 was US$2.31 billion, which was primarily attributable to US$2.05 billion in dividend payments and US$274 million in interest payments, partially offset by proceeds from the exercise of share options amounting to US$28 million.

Net cash used in financing activities for the year ended December 31, 2018 was US$1.10 billion, which was primarily attributable to US$4.34 billion of net repayments on the 2016 VML Credit Facility, US$2.05 billion in dividend payments and US$218 million in interest and deferred financing costs payments, partially offset by US$5.5 billion proceeds from the issuance of the Senior Notes.

Net cash used in financing activities for the year ended December 31, 2017 was US$2.21 billion, which was primarily attributable to US$2.07 billion in dividend payments, US$128 million in interest payments and US$20 million of repayments on the 2016 Non-Extended VML Term Loans in accordance with the 2016 VML Credit Facility agreement. During the year ended December 31, 2017, the Group withdrew and fully repaid borrowings in aggregate principal amount of US$650 million under the 2016 VML Revolving Facility.

Capital Expenditures

The following table sets forth our capital expenditures, excluding capitalized interest and construction payables, for the periods indicated:

 

     Year Ended December 31,      Six Months Ended June 30,  
     2017      2018      2019      2019      2020  
     (US$ in millions)  

The Venetian Macao

   $ 152    $ 179    $ 131    $ 38    $ 66

Sands Cotai Central

     84        130        276        107        368  

The Parisian Macao

     204        130        32        14        7  

The Plaza Macao

     22        63        296        59        127  

Sands Macao

     10        29        16        6        3  

Ferry and other operations

     5        1        3        1        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total capital expenditures

   $ 477    $ 532    $ 754    $ 225    $ 571
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Capital expenditures are used primarily for new projects and to renovate, upgrade and maintain existing properties.

Construction work on the conversion of Sands Cotai Central into the new integrated resort The Londoner Macao is progressing. The Londoner Macao will include some of London’s most recognizable landmarks such as the Houses of Parliament and the Big Ben. The resort will feature two hotels, the Londoner Court with approximately 370 luxury suites and The Londoner Macao Hotel with approximately 600 suites. Suites are being utilized as they are completed on a simulation basis for trial and feedback purposes. A number of new restaurants

 

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will open progressively from late 2020, our retail offerings will be expanded and rebranded as the Shoppes at Londoner. We expect the Londoner Court suites to be completed in late 2020, and overall The Londoner Macao project to be delivered in phases throughout 2020 and 2021.

Construction of The Grand Suites at Four Seasons is now complete and features 289 luxury suites. We have initiated approved gaming operations in this space and are utilizing suites on a simulation basis for trial and feedback purposes.

We anticipate the total costs associated with these development projects to be approximately US$2.2 billion. The ultimate costs and completion dates for these projects are subject to change as we complete construction. We expect to fund our developments through a combination of the remaining balance of the net proceeds from the issuance of the Outstanding Notes, borrowings from the 2018 SCL Revolving Facility and surplus from operating cash flows.

Off Balance Sheet Arrangements

We have not entered into any transactions with special purpose entities, nor have we engaged in any derivative transactions, other than interest rate swaps.

Contractual Obligations and Commitments

The following table sets forth our contractual obligations and commitments as of June 30, 2020:

 

     Payment Due by Period  
     Rest of
2020
     2021-2022      2023-2024      Thereafter      Total  
     (US$ in millions)  

Long-Term Debt Obligations

              

Senior Notes principal

   $ —      $ —      $ 1,800    $ 5,200    $ 7,000

Senior Notes interest

     155      680      595      717      2,147

Lease liabilities

     7      31      13      307      358

Contractual Obligations

              

Macao Annual Premium(i)

     21      63      —          —          84

Mall Deposits(ii)

     35      60      25      9      129

Other(iii)

     43      117      81      214      455
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 261    $ 951    $ 2,514    $ 6,447    $ 10,173
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(i)

In addition to the 39% gross gaming win tax in Macao (which is not included in this table as the amount we pay is variable in nature), we are required to pay an annual premium with a fixed portion and a variable portion, which is based on the number and type of gaming tables and gaming machines we operate. Based on the gaming tables and gaming machines in operation as of June 30, 2020, the annual premium payable to the Macao government is approximately $42 million through the termination of the gaming subconcession in June 2022.

(ii)

Mall deposits consist of refundable security deposits received from mall tenants.

(iii)

Primarily consists of all other non-cancellable contractual obligations and primarily relates to certain hotel and restaurant management and service agreements. The amounts exclude open purchase orders with our suppliers that have not yet been received as these agreements generally allow us the option to cancel, reschedule and adjust terms based on our business needs prior to the delivery of goods or performance of services.

Contingent Liabilities

We have contingent liabilities arising in the ordinary course of business. Management has made estimates for potential litigation costs based upon consultation with legal counsel. Actual results could differ from these estimates; however, in the opinion of management, such litigation and claims will not have a material adverse effect on our financial position, results of operations or cash flows.

 

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Quantitative and Qualitative Disclosure about Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our long-term debt and interest rate swap contracts and foreign currency exchange rate risk associated with our operations, which we may manage through the use of futures, options, caps, forward contracts and similar instruments. We do not hold or issue financial instruments for trading purposes and do not enter into derivative transactions that would be considered speculative positions. Our derivative financial instruments currently consist of interest rate swap contracts on certain fixed-rate long-term debt, which have been designated as hedging instruments for accounting purposes.

As of June 30, 2020, the estimated fair value of our fixed rate long-term debt was approximately US$7.49 billion, compared to its carrying value of US$7.0 billion. The estimated fair value of our fixed rate long-term debt is based on level 2 inputs (quoted prices in markets that are not active). A change in interest rates on fixed rate long-term debt impacts its fair value. A hypothetical 100 basis points change in market rates would cause the fair value of the fixed rate long-term borrowings to change by US$373 million.

The total notional amount of our