Company completes initial placement in effort to help finance Macau casino Melco International Development is trying to generate more than $2.4 billion through a series of fund-raising exercises to help finance an $8 billion Macau project featuring the world's first underwater casino. Last night, the company successfully completed the placement of 70 million new shares at $18.28 each to raise $1.27 billion, the initial investment for its 60 per cent-owned City of Dreams development. The remainder is owned by Australia's richest man, Kerry Packer, and his Publishing and Broadcasting Ltd. As well as the share placement, Melco said Deutsche Bank was preparing a preliminary proposal for a comprehensive debt-financing package. Melco also plans to issue $1.17 billion in convertible notes to chairman Stanley Ho Hung-sun's family trust to acquire his 49.2 per cent stake of a 1.21 million square foot site designated for the City of Dreams. Mr Ho's son, Lawrence Ho Yau-lung, managing director of Melco, yesterday played down the impact of such funding pressure, saying the joint venture would generate strong cashflow from City of Dreams luxury residential properties that would be up for presale next year. He added that the company expected the whole project to recoup its investment by 2010 - 18 months after the mid-2008 completion date. At the same time, the Park Hyatt casino resort on Taipa Island - which is scheduled to open in 2007 - will also contribute revenue. The City of Dreams project's underwater casino hall will house 450 gaming tables and 3,000 slot machines surrounded by tropical marine life. The Macanese project will also include two four-star hotels and one five-star hotel - with a combined 2,000 rooms, two luxury serviced apartment blocks measuring 1.5 million sq ft, a 4,000-seat performance hall and an upmarket shopping centre. Clarence Chung, Melco's chief financial officer, believed about 33 per cent of the $8 billion would be needed next year and in 2007, bringing the company to its capital expenditure peak. 'But the amount of cashflow from property sales can cover the investment cost,' he said. Based on Macau's current market prices for luxury homes of between $2,322 and $2,787 per square foot, analysts said the joint venture should generate revenue of up to $2 billion if all 750,000 sq ft in the first residential block were sold. Melco's $1.27 billion placement was about 1.5 times covered, according to a banker at sole bookrunner Credit Suisse First Boston. The deal was launched yesterday morning, offering 70 million shares at $18.10 to $18.70 per share. The company was said to have tested the market for the slightly larger deal of 90 million shares priced at about $19 at the end of last week. 'They do have to find different investors as I don't think one market can provide the lot,' said a banker unconnected with the placement. The shares were priced at $18.25, which represented a 5.9 per cent discount to the closing price of $19.40 before the stock was suspended from trading on Wednesday last week. Market sources said the discount was reasonable given the volatility surrounding Macau-concept stocks and the fact that the broader market had fallen 2.5 per cent while Melco had been suspended from trading. According to one source, the shares were sold mainly to long-only funds operating in Europe and Asia.