Private equity and hedge funds that backed Fisherman's Wharf, the colourful Macau waterfront theme park with a casino established by Stanley Ho Hung-sun and Macau legislator David Chow Kam-fai, are about to bail out of the HK$2 billion project and swallow massive losses.
In a fiasco more eye-popping than the park's enormous fake volcano and gold, Egyptian-themed casino, funds including United States-based Texas Pacific Group and Och Ziff are likely to write-off half the value of loans worth about US$340 million in return for being allowed to walk away, according to sources.
The saga dates to 2006, when Fisherman's Wharf privately issued a US$400 million convertible bond to raise new funds.
Mr Chow, who also owns the Macau Landmark hotel and attached Pharaoh's casino, was at the time mulling a Hong Kong share sale and talking of plans for a major expansion that would more than double the size of the park and add four new hotels.
Foreign investors who bought the bonds, sold by Merrill Lynch, did so anticipating that they could convert them into shares at a profit of 25-30 per cent after Fisherman's Wharf was floated on the Hong Kong exchange.
But three years on, the listing and the expansion plans have not materialised. Visitor numbers have fallen far short of expectations as it has struggled to compete against the pulling power of glitzy new casino resorts such as Las Vegas Sands Corp's Venetian Macao.
Bondholders battered by the financial crisis appear to have given up hope of a profitable exit from their investment in Fisherman's Wharf, and have decided to cut their losses while taking a hefty haircut.
