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Wynn Resorts Asks Bondholders to Shield It as Founders Fight

Updated on
  • Company aiming to up threshold to avoid buying out 2023 notes
  • ‘Real risk’ that someone could acquire more stock than founder

Casino mogul Steve Wynn and his ex-wife have given fresh meaning to the concept of marital bonds.

Wynn Resorts Ltd. wants to change terms on some of its bonds to protect the company from being forced to buy back debt as a complicated three-way lawsuit progresses. The court battle in question dates back to 2012 and involves Wynn, who earlier this month resigned from the company he founded amid sexual misconduct allegations; Elaine Wynn, an ex-board member who was divorced from Wynn for the second time in 2010, and their former business partner, Kazuo Okada.

Steve Wynn

Photographer: Brent Lewin/Bloomberg

If there’s no legal obstacle to Steve or Elaine selling a large block of shares, the company might be forced to buy back some of its debt at a price above its face value and its current market value. The buyback would stem from a provision in the notes known as a "change-of-control” put. Under the proviso, if any stockholder acquires more shares than those of Steve Wynn and his related parties, then Wynn Resorts will be forced to buy back some of its bonds from investors at 101 cents on the dollar.

The company’s $500 million of notes maturing in 2023 are trading at around 99.9 cents. Steve Wynn holds about 11.8 percent of the company’s shares now and said Tuesday he has no intention of selling.

That’s down by around 2 cents on the dollar since the Wall Street Journal published a story in January detailing allegations of sexual misconduct against 76-year-old Steve Wynn, which he denies. Regulators in Nevada and Macau, where Wynn Resorts owns casinos, are investigating, as are officials in Massachusetts, where the company is building a $2.4 billion complex.

Trigger Point

Wynn Resorts wants to raise the change-of-control trigger to 50 percent from its current lower level. The company is offering holders of the 2023 notes $10 million collectively to agree to the change.

Representatives for Wynn Resorts, based in Las Vegas, did not respond to requests seeking further comment.

An investor obtaining more stock than Steve Wynn and his related parties is a “real risk” for the company, according to Alexander Diaz-Matos, an analyst at credit research firm Covenant Review. “It’s very different than having any person acquire more than 50 percent of Wynn, which I don’t think is in the cards.”

But other bondholders may get hurt by this change if it goes through, Diaz-Matos said. The notes due in 2025 and 2027 have change-of-control provisions that can be triggered if either a shareholder buys more than 50 percent of the company, or another set of the company’s bonds has a change-of-control event triggered. If the 2023 notes lose their lower threshold, then the 2025 and 2027 notes are also less likely to have the provision triggered, Diaz-Matos said.

Legal Battle

Owners of the debt maturing in 2023 have until Feb. 27 at 5 p.m. in New York to decide if they’ll accept the offer, according to the statement proposing the amendment. It’s expected that they’ll do so, according to two people with knowledge of the matter, who asked not to be identified as the discussions were private.

At the heart of the legal fight is a 2010 agreement that gave Steve Wynn control over Elaine Wynn’s and Okada’s shares. This month, he agreed to give up the control he had over Elaine’s portion and has also said that the pact no longer binds either party, meaning she can sell her 9.4 percent stake.

Okada argues that the 2010 agreement is still in effect, and Wynn cannot discharge his ex-wife from it. A Nevada state court judge will hold a hearing March 2 on the matter.

— With assistance by Christopher Palmeri, and Edvard Pettersson

(Updates with investigation in fifth paragraph.)
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