Melco Soothes Credit Concerns

Melco shares recently were up $1.31 to $11.41. Prior to Friday, shares had tumbled 24% this week because of rumors floating around that Melco's new $2.75 billion credit facility was in danger of falling apart. The stock is still significantly below its $19 December IPO price.

The credit facility is set to provide financing for City of Dreams, Melco's next casino development, which will cater to the mass market. The facility will also fund development of a third casino, which will cater to day-trippers and will be located on the Macau Peninsula.

On the earnings call, management said it is still finalizing documentation with its lenders for the facility and portions of the facility are still being syndicated. Management said it was confident the syndication and facility will be completed.

The company also said that the doors are not closed for syndication in Asia, unlike the U.S., where credit markets have been roiled.

But what happens if the syndication does fall through? Several investors and analysts pressed management about a worst-case scenario on the conference call.

Lawrence Ho, Melco PBL's chief executive, said there would be strong shareholder support to boost the company in a hypothetical worst-case scenario.

As a reminder, Melco PBL is a joint venture between Melco International Development, a Hong-Kong listed holding company, and Publishing and Broadcasting Ltd., an Australia casino development and media firm.. The two parents own roughly 80% of Melco PBL's stock, meaning there is a very small float.