Wynn Resorts (NASDAQ: WYNN) recently revealed that its subsidiary, Wynn Resorts Finance (WRF), has issued $600 million worth of corporate debt that matures in 2031. This debt includes a coupon of 7.125%. The proceeds from this offering will be used to launch a tender offer for WRF notes due in 2025, as well as to buy any remaining bonds and to cover related transaction fees. This offer will expire at 5:00 pm in New York City on February 15, 2023, or earlier if it is terminated.
In order to compensate bondholders for redeeming their bonds prior to maturity, it is typical for corporate debt issuers to provide them with some form of remuneration. For both Wynn bondholders and equity investors, the new debt facilities are important because last year, increasing interest rates heavily impacted companies that have a high debt load, especially those with non-investment grade ratings.
The Federal Reserve has indicated that their rate tightening policy is not yet over, so issuing new debt with a lower interest rate is beneficial for debtors like Wynn. The bonds due in 2025 that the company is repurchasing have an interest rate of 7.750%.