Tuesday, June 18, 2002 | 11:26 a.m.
Steve Wynn's occasionally turbulent on-again, off-again relationship with Wall Street apparently is on again.
Wynn, who vowed to stay out of publicly traded securities after some scrapes with bankers and investors a few years ago, on Monday filed a registration statement for an initial public offering that would partially finance the Le Reve luxury resort.
The document, filed by Wynn Resorts Ltd. on Monday, spells out previously undisclosed details about the 2,701-room hotel-casino and its amenities at the site of the Desert Inn on the Las Vegas Strip.
Strip watchers knew an IPO was on the horizon; in April Wynn himself said he was considering it. But what caught observers off guard was the magnitude of the Le Reve offering. The registration statement spells out the sources and uses of $2.5 billion, taking the financing of gaming properties to an unprecedented level.
"He (Wynn) has always pushed the envelope in Las Vegas and challenged expectations," said Robin Farley, a gaming analyst with UBS Warburg, New York.
She said the timing of going public makes sense because gaming stocks are trading at higher multiples now than they have in the last two years.
But others are leery about the magnitude of the project.
"There is no precedent for something that costs $2.4 billion on the Strip," Prudential Securities Research gaming analyst Bill Lerner told Bloomberg News. "It sounds like an enormous price tag."
Some of the expenses -- disclosed by Wynn as $2.4989 billion -- aren't directly related to Le Reve but are included in the registration statement because they are part of the Wynn Resorts package. The document, filed with the Securities and Exchange Commission, lists total construction costs on Le Reve at $1.375 billion with land costs of $318.5 million.
Those construction costs are broken down to a $901.9 million construction contract with Las Vegas contractor Marnell Corrao Associates; $295.4 million for interior design, furniture, fixtures and equipment, signage and electronic equipment; and $64.2 million for design and engineering fees.
The price tag also includes $21.5 million for construction of a new 18-hole championship golf course replacing the existing Desert Inn course with construction expected to begin in the third quarter of 2002; $11.5 million for construction of a 1,840-space parking garage; $13.4 million for government approvals and permits; $12.6 million for insurance; $23.6 million for miscellaneous capital projects; $6.3 million for utilities and security during construction; and $24.6 million for other contingencies.
There are other related expenses that aren't treated as construction costs. In addition to the land costs, the filing projects $251.1 million in interest costs; $139.8 million in pre-opening costs; $121.2 million in other fixtures, such as slot machines, gaming equipment, computers, plates, glassware, linen and other kitchen and hotel supplies; $73 million in debt and equity issuance fees; $50 million in a construction completion guarantee that offers incentives for early completion of the project; and $35.5 million in working capital for the opening, including the initial inventories.
Other expenses included in the registration are $24 million for entertainment production costs associated with the creation of a water show by Franco Dragone, who developed "O" at Bellagio and "Mystere" at Treasure Island; $23.3 million for an investment in Wynn's proposed casino resort project in Macau; and $46.4 million for a corporate aircraft and related expenses for the plane.
The balance of the money to be raised would cover other miscellaneous expenses.
Other key elements of the hotel outlined in the registration statement:
Rooms will be larger than standard Las Vegas Strip accommodations, with rooms of 620 square feet, suites of 1,250 square feet, fairway patio-style suites of 2,200 square feet and six villas averaging 7,100 square feet.
A 48-story building will include three stories of restaurants, retail outlets and the casino, with the remaining 45 floors including the rooms and suites.
A "casually elegant" casino will have 2,000 slot machines and 120 table games.
The 18-hole golf course, to be designed by Wynn and Tom Fazio, who designed the Shadow Creek golf course in North Las Vegas, will be open exclusively to hotel guests.
A tree-lined man-made mountain eight stories tall along Las Vegas Boulevard will enclose the area along the front of the hotel and a three-acre man-made lake will be designed to create an intimate atmosphere for guests. "The shape of our hotel high-rise building is designed to follow the curved line of a gentle arc to provide each room with a view of the golf course, lake and 'mountain' setting or the surrounding mountains," the filing says.
The Dragone water show will be staged in a 2,080-seat showroom.
The development of an onsite Ferrari and Maserati car dealership is planned.
Wynn's art collection, which in the past has included paintings by Paul Cezanne, Paul Gaugin, Edouard Manet, Henri Matisse, Amedeo Modigliani, Claude Monet, Pablo Picasso and Vincent Van Gogh, will be on display at a gallery at the hotel.
Guests will have access to premium shopping at a retail center at the hotel and at the Fashion Show Mall, which is undergoing an expansion and renovation, across the street.
Most of the financial resources for Le Reve already have been arranged. The filing lists $941.1 million in equity contributions -- $355 million of that from the IPO to be underwritten by Deutsche Bank Securities, Bear Stearns & Co. Inc., and Banc of America Securities LLC, lead underwriters, and Dresdner Kleinwort Wassterstein as co-lead manager of the offering.
Wynn Resorts has granted the underwriters an option to purchase up to an additional $53.25 million of common stock to cover any over allotments, making proceeds of the IPO as high as $408.25 million.
Wynn Resorts also announced Monday the planned issuance of $350 million in second mortgage notes.
The other sources of funds include a $747 million revolving credit facility and a $250 million delay draw term loan facility, for which Wynn already has a letter of commitment from Deutsche Bank Securities, Bear Stearns & Co., and Banc of America Securities.
The company is in negotiation for a $150 million loan for furniture, fixtures and equipment, and has a $28.5 million loan with Bank of America for the corporate jet, a Bombardier Global Express aircraft.
The statement also lists interest income of $27.9 million and $4.4 million in other income, including incidental operations, such as the management of the Desert Inn golf course.
Of the equity contributions, Wynn put up $32 million in cash plus his Macau interest, valued at $56 million; Aruze USA -- the American subsidiary of pachinko machine manufacturer Aruze Corp., controlled by Japanese entrepreneur Kazuo Okada -- contributed $120 million cash; and Baron Asset Fund contributed $20.3 million. Baron, a Massachusetts-based business trust, is comprised of four publicly traded mutual funds.
At the preparation of the offering, Wynn and Aruze USA each held 47.431 percent of the common stock, Baron held 4.992 percent and the Kenneth R. Wynn Family Trust held 0.146 percent.
Wynn's return to Wall Street for cash marks a departure from his previously stated course, but a financial adviser encouraged him to change his mind when casino stocks were strengthened by post-Sept. 11 optimism. Analysts said gaming companies have fared well since the terrorist attacks because a number of governments are looking to taxes on casinos as a potential revenue source for depleted coffers.
Wynn officially faded from the publicly traded market when Mirage Resorts Inc. merged with MGM Grand Inc. to become MGM MIRAGE. Wynn used proceeds from the sale to acquire the Desert Inn hotel-casino from Starwood Hotels & Resorts Worldwide Inc. for $270 million in April 2000.
When he still controlled Mirage Resorts, Wynn was criticized by some investors for overspending on Mirage's last two resorts, Bellagio in Las Vegas and Beau Rivage in Biloxi, Miss.
Some Wall Streeters also took Wynn to task for a November 1999 keynote address at a Deutsche Bank conference at which he apparently sang three songs from a musical he had hoped to stage at The Mirage. While some investment bankers enjoyed Wynn's presentation, at which he outlined a plan to lure writers, designers and choreographers away from Broadway to a state-of-the-art theater he wanted to build at The Mirage, others came away lukewarm or worse about the state of the gaming industry.
Wynn's return to the stock market will be marked with a new symbol that bears his name -- WYNN -- and it would trade on the Nasdaq exchange.
Investment bankers today say there's a lot of interest in the IPO, but there are mixed feelings on whether Le Reve can produce the results necessary to pay its debts and turn a profit.
But they also point out that it's still early in the process to judge whether Wynn's plan will succeed.
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