Melco Resorts & Entertainment Limited (MLCO) Q4 2020 Earnings Call Transcript

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NASDAQ: MLCO

Melco Resorts & Entertainment

Market Cap Today's Change Arrow Thin Down (3. 25%) $0. 18 Current Price Current Price as of September 13, 2024 at 4:00 PM ET

MLCO's December 2020 Earnings Conference Call.

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Melco Resorts & Entertainment Limited (MLCO 3. 25%) 2020 Fourth Quarter Earnings Call February 25, 2021 , 8:30 AM ET

Contents:

• Comments
• Question and Answer
• Call Participants

Prepared Remarks:

Operator

Thank you all for joining Melco Resorts & Entertainment Limited's 2020 Fourth Quarter Earnings Conference Call. [Follow operator instructions.]

Now I'll turn the call over to Timothy Rogic. Thank you. It's a pleasure to have you on the line.

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Timothy Magic -- Director

Thank you for joining us today for our Q4 2020 earnings call. Participating in this call are Lawrence Ho, Jeff Davis, Evan Winkler, and our Real Estate Presidents for Macau, Manila and Cyprus. First, please note that today's discussion may contain forward-looking statements pursuant to the safe harbor provisions of the federal securities laws. Our actual results may differ from those anticipated. We may also discuss non-GAAP measures. Definitions of each of these measures and a reconciliation to the most comparable GAAP financial measure are included in the earnings release. Finally, please note that the earnings supplement slides are available on our investor relations website.

I will now turn the call over to Lawrence.

Lawrence Ho Yau Lun -- Chairman and Chief Executive Officer

Then. Thank you, Tim. In the fourth quarter, the business level of the integrated resort is gradually recovering. The number of COVID infected people around the world are increasing, but the Macau and the mainland China are taking care of the border and cautious. The infected COVID has not been confirmed for more than 300 days. With the benefits of resuming visa issuance, Macau's mass tables, which accounted for most of our EBITDA before COVID, showed prominent improvements from the third quarter to the fourth quarter. Property EBITDA has become a plus in the Macau business and the global business as a whole.

We are optimistic about recovering Macau, and we are looking forward to the increase in the number of visitors for the time being. Earlier this week, the remaining two cities in the Macau Medium Risk List have been deleted, and all passengers from mainland China to Macau have been lifted. More notable is that there is no quarantine restrictions on citizens of mainland China returning from Macau. In Macau, the safety and benefits of employees, customers, and local communities are still the highest priority. We are looking forward to faster recovery and faster growth in both premium mass segments and premium direct segments, which will make a profit to Melco's hig h-end integrated portfolios. At present, it is expected that the benefits of strong demand will begin to appear from mi d-March to late. < SPAN> Then. Thank you, Tim. In the fourth quarter, the business level of the integrated resort is gradually recovering. The number of COVID infected people around the world are increasing, but the Macau and the mainland China are taking care of the border and cautious. The infected COVID has not been confirmed for more than 300 days. With the benefits of resuming visa issuance, Macau's mass tables, which accounted for most of our EBITDA before COVID, showed prominent improvements from the third quarter to the fourth quarter. Property EBITDA has become a plus in the Macau business and the global business as a whole.

We are optimistic about recovering Macau, and we are looking forward to the increase in the number of visitors for the time being. Earlier this week, the remaining two cities in the Macau Medium Risk List have been deleted, and all passengers from mainland China to Macau have been lifted. More notable is that there is no quarantine restrictions on citizens of mainland China returning from Macau. In Macau, the safety and benefits of employees, customers, and local communities are still the highest priority. We are looking forward to faster recovery and faster growth in both premium mass segments and premium direct segments, which will make a profit to Melco's hig h-end integrated portfolios. At present, it is expected that the benefits of strong demand will begin to appear from mi d-March to late. Then. Thank you, Tim. In the fourth quarter, the business level of the integrated resort is gradually recovering. The number of COVID infected people around the world are increasing, but the Macau and the mainland China are taking care of the border and cautious. The infected COVID has not been confirmed for more than 300 days. With the benefits of resuming visa issuance, Macau's mass tables, which accounted for most of our EBITDA before COVID, showed prominent improvements from the third quarter to the fourth quarter. Property EBITDA has become a plus in the Macau business and the global business as a whole.

We are optimistic about recovering Macau, and we are looking forward to the increase in the number of visitors for the time being. Earlier this week, the remaining two cities in the Macau Medium Risk List have been deleted, and all passengers from mainland China to Macau have been lifted. More notable is that there is no quarantine restrictions on citizens of mainland China returning from Macau. In Macau, the safety and benefits of employees, customers, and local communities are still the highest priority. We are looking forward to faster recovery and faster growth in both premium mass segments and premium direct segments, which will make a profit to Melco's hig h-end integrated portfolios. At present, it is expected that the benefits of strong demand will begin to appear from mi d-March to late.

City of Dreams Manila has been conducting a hospitality business on a limited trial ru n-based based on Pagcor's approval, and has recorded a positive eBitDa. In the third quarter of 2020, the demand for domestic gaming at Cyprus casinos, while the increase in COVID incidents, the Cyprus government announced the second closing in the fourth quarter. As a result, our casino was partially closed on November 13 and was completely closed on December 1. Despite the global pandemic, Melco is still working on a global development program. The next main project in Macau is the second stage of Studio City and is currently under construction. Once the second period expansion work is completed, the number of hotels in Studio City will increase by about 60 %, and two new hotel tower will provide a luxury hotel room with about 900 rooms.

The gaming phase has been expanded, and new attractions other than gaming, including cinnplex, world's largest indoor outdoor water park, luxury restaurant, and stat e-o f-th e-art MICE space. To further enhance the competitiveness in Macau's premium mass segments, upgrade work will continue in City of Dreams. And the completely renovated NUWA will open at the end of March. We are closing this tower in the near future to the middle, reducing the number of keys, transforming them into fiv e-star hotels in all rooms, and aiming for the renewal opening in 2023. With this renovation, a 5-star hotel will be born in all Tower of City of Dreams, and the position as a leading premium hotel in Macau will increase. At Cyprus, the development of City of Dreams Mediterranean is progressing. < SPAN> City of Dreams Manila has a hospitality business based on Pagcor's approval, and has recorded a plus EBITDA. In the third quarter of 2020, the demand for domestic gaming at Cyprus casinos, while the increase in COVID incidents, the Cyprus government announced the second closing in the fourth quarter. As a result, our casino was partially closed on November 13 and was completely closed on December 1. Despite the global pandemic, Melco is still working on a global development program. The next main project in Macau is the second stage of Studio City and is currently under construction. Once the second period expansion work is completed, the number of hotels in Studio City will increase by about 60 %, and two new hotel tower will provide a luxury hotel room with about 900 rooms.

The gaming phase has been expanded, and new attractions other than gaming, including cinnplex, world's largest indoor outdoor water park, luxury restaurant, and stat e-o f-th e-art MICE space. To further enhance the competitiveness in Macau's premium mass segments, upgrade work will continue in City of Dreams. And the completely renovated NUWA will open at the end of March. We are closing this tower in the near future to the middle, reducing the number of keys, transforming them into fiv e-star hotels in all rooms, and aiming for the renewal opening in 2023. With this renovation, a 5-star hotel will be born in all Tower of City of Dreams, and the position as a leading premium hotel in Macau will increase. At Cyprus, the development of City of Dreams Mediterranean is progressing. City of Dreams Manila has been conducting a hospitality business on a limited trial ru n-based based on Pagcor's approval, and has recorded a positive eBitDa. In the third quarter of 2020, the demand for domestic gaming at Cyprus casinos, while the increase in COVID incidents, the Cyprus government announced the second closing in the fourth quarter. As a result, our casino was partially closed on November 13 and was completely closed on December 1. Despite the global pandemic, Melco is still working on a global development program. The next main project in Macau is the second stage of Studio City and is currently under construction. Once the second period expansion work is completed, the number of hotels in Studio City will increase by about 60 %, and two new hotel tower will provide a luxury hotel room with about 900 rooms.

The gaming phase has been expanded, and new attractions other than gaming, including cinnplex, world's largest indoor outdoor water park, luxury restaurant, and stat e-o f-th e-art MICE space. To further enhance the competitiveness in Macau's premium mass segments, upgrade work will continue in City of Dreams. And the completely renovated NUWA will open at the end of March. We are closing this tower in the near future to the middle, reducing the number of keys, transforming them into fiv e-star hotels in all rooms, and aiming for the renewal opening in 2023. With this renovation, a 5-star hotel will be born in all Tower of City of Dreams, which will further increase as a Macau premium hotel. At Cyprus, the development of the City of Dreams Mediterranean is progressing.

After the completion, it will be more than 500 luxury hotels, about 10, 000 square meters MICE space, as well as the annex theater, family event recalls, various luxury restaurants, luxury retailers, etc., Europe's largest resort. When we look at Japan, we want to emphasize the commitment of bringing the world leading IR to Japan. The process in Japan is delayed and remains complicated, but each law has a new momentum, such as starting the RFP process again. We are convinced that Japan is the world's most potential new gaming market. At the same time, we will be patient and maintain a disciplined approach to all development activities, including Japan. Finally, I am confident in Melco's medium- to lon g-term growth outlook. Macau still believes that it is still the most attractive integrated resort market in the world. Our balance sheet has been further enhanced by recent capital market transactions, making it possible to overcome immediate issues while investing in the future.

Then, I will explain the numbers.

Jeffrey Stuart Davi s-Executive Vice President and Supreme Finance Officer

Questions and Answers:

Operator

Then, I will explain the numbers.

Jeffrey Stuart Davi s-Executive Vice President and Supreme Finance Officer

Thank you, Lawrence. In the fourth quarter of 2020, the EBITDA for the entire group was $ 53 million, and the EBITDA after the luck was $ 49 million. The advantageous VIP winning rate has been affected by about $ 9 million, respectively, to COD Macau and COD Manila EBITDA, respectively. Studio City and Altira's EBITDA were affected by a disadvantageous VIP win rate of about $ 4 million, respectively. On the consolidated basis, the total was about $ 5 million positive. For more information about these adjustments, see the settlement slides on our investors' websites. In addition to the change in the winning rate of VIP, our business performance was also affected by the loan and downturn. In the fourth quarter of 2020, about $ 12 million in the fourth quarter of 2019, about $ 12 million, a cost of about $ 23 million was incurred. After the completion, it will be more than 500 luxury hotels, about 10, 000 square meters MICE space, as well as the annex theater, family event recalls, various luxury restaurants, luxury retailers, etc., Europe's largest resort. When we look at Japan, we want to emphasize the commitment of bringing the world leading IR to Japan. The process in Japan is delayed and remains complicated, but each law has a new momentum, such as starting the RFP process again. We are convinced that Japan is the world's most potential new gaming market. At the same time, we will be patient and maintain a disciplined approach to all development activities, including Japan. Finally, I am confident in Melco's medium- to lon g-term growth outlook. Macau still believes that it is the world's most attractive integrated resort market. Our balance sheet has been further enhanced by recent capital market transactions, making it possible to overcome immediate issues while investing in the future.

Lawrence Ho Yau Lun -- Chairman and Chief Executive Officer

Jeffrey Stuart Davi s-Executive Vice President and Supreme Finance Officer

Thank you, Lawrence. In the fourth quarter of 2020, the EBITDA for the entire group was $ 53 million, and the EBITDA after the luck was $ 49 million. The advantageous VIP winning rate has been affected by about $ 9 million, respectively, to COD Macau and COD Manila EBITDA, respectively. Studio City and Altira's EBITDA were affected by a disadvantageous VIP win rate of about $ 4 million, respectively. On the consolidated basis, the total was about $ 5 million positive. For more information about these adjustments, see the settlement slides on our investors' websites. In addition to the change in the winning rate of VIP, our business performance was also affected by the loan and downturn. In the fourth quarter of 2020, about $ 12 million in the fourth quarter of 2019, about $ 12 million, a cost of about $ 23 million was incurred.

On a year-over-year basis, the change in the allowance for credit losses negatively impacted EBITDA by approximately $11 million. Additionally, fourth quarter 2020 EBITDA was positively impacted by a bonus reversal of $16 million. Turning to the balance sheet: To optimize its capital structure, Studio City issued $750 million of 5% senior notes due 2029 in January. The proceeds will be used to refinance $600 million of 7. 25% senior notes due 2024, with the remaining proceeds to be used for second phase capital expenditures and general corporate purposes. The transaction lowered average borrowing rates and extended Studio City's maturity profile, with its next significant debt maturity due in 2025. Also in January, Melco took advantage of favorable market conditions to redeem an additional $250 million of its 5. 375% senior notes due 2029. The tap was priced at zero-3. 4 times par, resulting in an effective borrowing rate of approximately 4. 9%. Cash on hand at the end of December was approximately $1. 8 billion.

Excluding the impact of the capital markets transactions in January, the cash balance would be approximately $1. 9 billion. Combined with approximately $2 billion of unused revolver facilities in Macau and Manila, liquidity at the end of December was approximately $3. 9 billion. To provide more clarity on its capital structure, excluding its operations in Studio City, the Philippines and Cyprus, Melco ended the fourth quarter of 2020 with cash of approximately $900 million and total debt of approximately $4. 1 billion. As we normally do, we will provide guidance on non-operating items for the coming fiscal year. Depreciation expense is expected to be approximately $145 million to $150 million, corporate expenses are expected to be approximately $20 million to $22 million, and consolidated net interest expense is expected to be approximately $94 million to $98 million, including $11 million of finance lease interest and $4 million of capitalized interest related to City of Dreams Manila. This concludes the brief.

Operator, we will now return to the Q& A session.

Lawrence Ho Yau Lun -- Chairman and Chief Executive Officer

[Operator Instructions] We have the first question from Joe Greff of JP Morgan. Please go ahead.

Jeffrey Stuart Davi s-Executive Vice President and Supreme Finance Officer

Good evening. Thanks for taking my question. Lawrence, your tone today is probably the most optimistic, at least for us, that you've been in a year. And your comments about the increase in visitor numbers during your term and the expectation of further recovery in mid to late March caught our attention. What is the basis for this increased optimistic outlook compared to just three months ago? And there's been some obvious positives recently with the easing of travel restrictions. To what extent is this optimism based on traction or easing of visa issuance from mainland China?

Operator

Joe, let me talk high level and David talk about the details. Well, I think our optimism comes from the fact that we've seen demand come back, even last week, as we've come out of the Chinese New Year, and we've seen the quarantine cities from mainland China come out, and early March is always a time of major political compromise meetings. I think there's a lot of areas that are getting a little bit better since then. A year ago, when we had this call on Q4 2021, I think we said at the outset that it was going to be very slow, very gradual.

And I think we're finally seeing light at the end of the tunnel. If you look at the spending behavior in China, it's very impressive, given how successful China and Macau have been in controlling the virus. And then today we also had the news that flights between Taiwan and Macau have resumed. I think it's all these little pieces coming together that are really showing us how strong the end of the Lunar New Year has been. What do you think, David?

David Sisk -- Chief Operating Officer, Macau Resorts and President, City of Dreams, Macau

Lawrence Ho Yau Lun -- Chairman and Chief Executive Officer

When IVS is back and other parts and other things start to play an active part, you can see that customers want to come. Another thing I was really happy. In Guangdong Province, the number of customers who had not been seen before is starting to increase. Singapore has also developed premium directs for at least one year. I know there is demand. People want to come here. As the spread of vaccines and the easiest for travelers to come, this situation will be improved. So we hope this is a turning point.

Lawrence Ho Yau Ru n-Chairman and Sea

And I think we're finally seeing light at the end of the tunnel. If you look at the spending behavior in China, it's very impressive, given how successful China and Macau have been in controlling the virus. And then today we also had the news that flights between Taiwan and Macau have resumed. I think it's all these little pieces coming together that are really showing us how strong the end of the Lunar New Year has been. What do you think, David?

Joe Gree f-JP Morga n-Analyst

Lawrence Ho Yau Lun -- Chairman and Chief Executive Officer

Operator

On a year-over-year basis, the change in the allowance for credit losses negatively impacted EBITDA by approximately $11 million. Additionally, fourth quarter 2020 EBITDA was positively impacted by a bonus reversal of $16 million. Turning to the balance sheet: To optimize its capital structure, Studio City issued $750 million of 5% senior notes due 2029 in January. The proceeds will be used to refinance $600 million of 7. 25% senior notes due 2024, with the remaining proceeds to be used for second phase capital expenditures and general corporate purposes. The transaction lowered average borrowing rates and extended Studio City's maturity profile, with its next significant debt maturity due in 2025. Also in January, Melco took advantage of favorable market conditions to redeem an additional $250 million of its 5. 375% senior notes due 2029. The tap was priced at zero-3. 4 times par, resulting in an effective borrowing rate of approximately 4. 9%. Cash on hand at the end of December was approximately $1. 8 billion.

Billy U n-Bank of Americ a-Analyst < Span> Joe, about two. One is, as Lawrence said, the end is the Lunar New Year. We didn't expect much about what would happen due to Macau's regulations. As Macau's regulations were alleviated, the tourists coming in the Lunar New Year were much more and incredible than we imagined. In the Lunar New Year, we witnessed its quality. As a result, a considerable amount was gathered in the fourth quarter, but regulations began immediately after January, and gradually decreased. However, the speed of return after the regulation is canceled ...

When IVS is back and other parts and other things start to play an active part, you can see that customers want to come. Another thing I was really happy. In Guangdong Province, the number of customers who had not been seen before is starting to increase. Singapore has also developed premium directs for at least one year. I know there is demand. People want to come here. As the spread of vaccines and the easiest for travelers to come, this situation will be improved. So we hope this is a turning point.

And I think we're finally seeing light at the end of the tunnel. If you look at the spending behavior in China, it's very impressive, given how successful China and Macau have been in controlling the virus. And then today we also had the news that flights between Taiwan and Macau have resumed. I think it's all these little pieces coming together that are really showing us how strong the end of the Lunar New Year has been. What do you think, David?

Then Joe, another one, David has remembered. And when they talk to the various levels of the government, they all are very aggressive with China and Related Bureau, in terms of resuming each visa panel and group tours. So there are a lot of positive things they are working on. If the control of COVID in China returns to Macau and it becomes easier to enter Macau, the willingness to visit Macau will definitely increase.

Operator

Understood. thank you very much. thank you very much.

Operator

thank you very much. The next question is from Bank of Billy Eun of Bank of America. please.

Lawrence Ho Yau Lun -- Chairman and Chief Executive Officer

When IVS is back and other parts and other things start to play an active part, you can see that customers want to come. Another thing I was really happy. In Guangdong Province, the number of customers who had not been seen before is starting to increase. Singapore has also developed premium directs for at least one year. I know there is demand. People want to come here. As the spread of vaccines and the easiest for travelers to come, this situation will be improved. So we hope this is a turning point.

Lawrence Ho Yau Ru n-Chairman and Sea

Operator

Joe Gree f-JP Morga n-Analyst

The gaming phase has been expanded, and new attractions other than gaming, including cinnplex, world's largest indoor outdoor water park, luxury restaurant, and stat e-o f-th e-art MICE space. To further enhance the competitiveness in Macau's premium mass segments, upgrade work will continue in City of Dreams. And the completely renovated NUWA will open at the end of March. We are closing this tower in the near future to the middle, reducing the number of keys, transforming them into fiv e-star hotels in all rooms, and aiming for the renewal opening in 2023. With this renovation, a 5-star hotel will be born in all Tower of City of Dreams, and the position as a leading premium hotel in Macau will increase. At Cyprus, the development of City of Dreams Mediterranean is progressing. City of Dreams Manila has been conducting a hospitality business on a limited trial ru n-based based on Pagcor's approval, and has recorded a positive eBitDa. In the third quarter of 2020, the demand for domestic gaming at Cyprus casinos, while the increase in COVID incidents, the Cyprus government announced the second closing in the fourth quarter. As a result, our casino was partially closed on November 13 and was completely closed on December 1. Despite the global pandemic, Melco is still working on a global development program. The next main project in Macau is the second stage of Studio City and is currently under construction. Once the second period expansion work is completed, the number of hotels in Studio City will increase by about 60 %, and two new hotel tower will provide a luxury hotel room with about 900 rooms.

Operator

Operator

The gaming phase has been expanded, and new attractions other than gaming, including cinnplex, world's largest indoor outdoor water park, luxury restaurant, and stat e-o f-th e-art MICE space. To further enhance the competitiveness in Macau's premium mass segments, upgrade work will continue in City of Dreams. And the completely renovated NUWA will open at the end of March. We are closing this tower in the near future to the middle, reducing the number of keys, transforming them into fiv e-star hotels in all rooms, and aiming for the renewal opening in 2023. With this renovation, a 5-star hotel will be born in all Tower of City of Dreams, and the position as a leading premium hotel in Macau will increase. At Cyprus, the development of City of Dreams Mediterranean is progressing. City of Dreams Manila has been conducting a hospitality business on a limited trial ru n-based based on Pagcor's approval, and has recorded a positive eBitDa. In the third quarter of 2020, the demand for domestic gaming at Cyprus casinos, while the increase in COVID incidents, the Cyprus government announced the second closing in the fourth quarter. As a result, our casino was partially closed on November 13 and was completely closed on December 1. Despite the global pandemic, Melco is still working on a global development program. The next main project in Macau is the second stage of Studio City and is currently under construction. Once the second period expansion work is completed, the number of hotels in Studio City will increase by about 60 %, and two new hotel tower will provide a luxury hotel room with about 900 rooms.

Hello, good evening. Thank you for holding a telephone conference. Regarding the normalization of border, it is a continuation of the previous comment. I think the situation is still fluid, but can you tell us about Lawrence's personal thoughts? What should we expect to be more relaxed? Will it be alleviated in the next few months, or is it still three or six months ahead?

Operator

Again, Billy, we are very realistic, probably the most pessimistic and like Debbie Downer last year. But to be honest, we see how vaccines are deployed in China and Hong Kong, and believe that Macau, Greater, Hong Kong, Macau, Taiwan, and China are over 90 % of our business. So I think that is the key to restart. I think the resumption of e-channel will eventually depend on Macau and the Chinese government. However, assuming that the introduction of the vaccine has progressed steadily and Macau and Hong Kong have started, I think it will be resumed in a few months. So I think it's probably two or three months.

The gaming phase has been expanded, and new attractions other than gaming, including cinnplex, world's largest indoor outdoor water park, luxury restaurant, and stat e-o f-th e-art MICE space. To further enhance the competitiveness in Macau's premium mass segments, upgrade work will continue in City of Dreams. And the completely renovated NUWA will open at the end of March. We are closing this tower in the near future to the middle, reducing the number of keys, transforming them into fiv e-star hotels in all rooms, and aiming for the renewal opening in 2023. With this renovation, a 5-star hotel will be born in all Tower of City of Dreams, and the position as a leading premium hotel in Macau will increase. At Cyprus, the development of City of Dreams Mediterranean is progressing. City of Dreams Manila has been conducting a hospitality business on a limited trial ru n-based based on Pagcor's approval, and has recorded a positive eBitDa. In the third quarter of 2020, the demand for domestic gaming at Cyprus casinos, while the increase in COVID incidents, the Cyprus government announced the second closing in the fourth quarter. As a result, our casino was partially closed on November 13 and was completely closed on December 1. Despite the global pandemic, Melco is still working on a global development program. The next main project in Macau is the second stage of Studio City and is currently under construction. Once the second period expansion work is completed, the number of hotels in Studio City will increase by about 60 %, and two new hotel tower will provide a luxury hotel room with about 900 rooms.

Billy U n-Bank of Americ a-Analyst < Span> Hello, good evening. Thank you for holding a telephone conference. Regarding the normalization of border, it is a continuation of the previous comment. I think the situation is still fluid, but can you tell us about Lawrence's personal thoughts? What should we expect to be more relaxed? Will it be alleviated in the next few months, or is it still three or six months ahead?

Operator

Again, Billy, we are very realistic, probably the most pessimistic and like Debbie Downer last year. But to be honest, we see how vaccines are deployed in China and Hong Kong, and believe that Macau, Greater, Hong Kong, Macau, Taiwan, and China are over 90 % of our business. So I think that is the key to restart. I think the resumption of e-channel will eventually depend on Macau and the Chinese government. However, assuming that the introduction of the vaccine has progressed steadily and Macau and Hong Kong have started, I think it will be resumed in a few months. So I think it's probably two or three months.

On a year-over-year basis, the change in the allowance for credit losses negatively impacted EBITDA by approximately $11 million. Additionally, fourth quarter 2020 EBITDA was positively impacted by a bonus reversal of $16 million. Turning to the balance sheet: To optimize its capital structure, Studio City issued $750 million of 5% senior notes due 2029 in January. The proceeds will be used to refinance $600 million of 7. 25% senior notes due 2024, with the remaining proceeds to be used for second phase capital expenditures and general corporate purposes. The transaction lowered average borrowing rates and extended Studio City's maturity profile, with its next significant debt maturity due in 2025. Also in January, Melco took advantage of favorable market conditions to redeem an additional $250 million of its 5. 375% senior notes due 2029. The tap was priced at zero-3. 4 times par, resulting in an effective borrowing rate of approximately 4. 9%. Cash on hand at the end of December was approximately $1. 8 billion.

Billy U n-Bank of Americ a-Analyst Hello, Good evening. Thank you for holding a telephone conference. Regarding the normalization of border, it is a continuation of the previous comment. I think the situation is still fluid, but can you tell us about Lawrence's personal thoughts? What should we expect to be more relaxed? Will it be alleviated in the next few months, or is it still three or six months ahead?

Operator

Again, Billy, we are very realistic, probably the most pessimistic and like Debbie Downer last year. But to be honest, we see how vaccines are deployed in China and Hong Kong, and believe that Macau, Greater, Hong Kong, Macau, Taiwan, and China are over 90 % of our business. So I think that is the key to restart. I think the resumption of e-channel will eventually depend on Macau and the Chinese government. However, assuming that the introduction of the vaccine has progressed steadily and Macau and Hong Kong have started, I think it will be resumed in a few months. So I think it's probably two or three months.

Hopefully, normalization may be seen in the second quarter or the end of the second quarter. Macau, Hong Kong and China have a very scientific approach. Macau, Hong Kong and China have a very scientific approach. Macau clearly tells Hong Kong that if Macau and China have begun to have the hygiene norms that are now shared, and that less than 10 cases will be infected in the field, the passage will be resumed. I think. Hong Kong is really approaching this number now. So, for the first time in the last 12 months, it has been more positive than negative.

Billy U n-Bank of Americ a-Analyst

Lawrence Ho Yau Lun -- Chairman and Chief Executive Officer

Lawrence Ho Yau Lun -- Chairman and CEO

I'll let David tell you more about it, but I think we're in a very favorable position. But compared to Golden Week, I think surprisingly, especially last week, we did very well. But.

Hopefully, normalization may be seen in the second quarter or the end of the second quarter. Macau, Hong Kong and China have a very scientific approach. Macau, Hong Kong and China have a very scientific approach. Macau clearly tells Hong Kong that if Macau and China have begun to have the hygiene norms that are now shared, and that less than 10 cases will be infected in the field, the passage will be resumed. I think. Hong Kong is really approaching this number now. So, for the first time in the last 12 months, it has been more positive than negative.

Yes, we definitely exceeded our target of Golden Week in October 2020. I think you can see a few things. Both premium mass and premium direct are driving the premium segment. We haven't got the announcements back yet. You can see it clearly when you look at the visitor numbers that the government has released, and that's just in the premium segment. And the other thing, when you look at the room nights, the hotels are not sold out. But when you look at our occupancy room nights, we feel that for theoretical rooms and the players that we have come in, it's the best that we've seen since the fourth quarter of 2019.

Operator

Billy N-Bank of Americ a-Analyst

thank you. thank you very much.

Operator

Lawrence Ho Yau Lun -- Chairman and Chief Executive Officer

Pravin Chordar y-Morgan Stanle y-Analyst

The gaming phase has been expanded, and new attractions other than gaming, including cinnplex, world's largest indoor outdoor water park, luxury restaurant, and stat e-o f-th e-art MICE space. To further enhance the competitiveness in Macau's premium mass segments, upgrade work will continue in City of Dreams. And the completely renovated NUWA will open at the end of March. We are closing this tower in the near future to the middle, reducing the number of keys, transforming them into fiv e-star hotels in all rooms, and aiming for the renewal opening in 2023. With this renovation, a 5-star hotel will be born in all Tower of City of Dreams, and the position as a leading premium hotel in Macau will increase. At Cyprus, the development of City of Dreams Mediterranean is progressing. City of Dreams Manila has been conducting a hospitality business on a limited trial ru n-based based on Pagcor's approval, and has recorded a positive eBitDa. In the third quarter of 2020, the demand for domestic gaming at Cyprus casinos, while the increase in COVID incidents, the Cyprus government announced the second closing in the fourth quarter. As a result, our casino was partially closed on November 13 and was completely closed on December 1. Despite the global pandemic, Melco is still working on a global development program. The next main project in Macau is the second stage of Studio City and is currently under construction. Once the second period expansion work is completed, the number of hotels in Studio City will increase by about 60 %, and two new hotel tower will provide a luxury hotel room with about 900 rooms.

Lawrence Ho Ya u-Ru n-Chairman and Supreme Executive Officer < Span>, but we are optimistic in the future. I think it will be more and more free. As I said many times, I know that customers want to come. I know there is demand. However, we only need to be allowed to come, and we believe that things will jump from there. Therefore, it is very surprising to start removing the city and the prefecture from the list and the number is decreasing. There are many people coming in. Traditionally, Macau reservations are very slow. The player who canceled or said he would not come, ended. It was quite unusual for us. So, this time it was not sold out either. It wasn't like a normal New Year, but it was much better than the October October. We know that customers want to visit.

thank you. thank you very much.

thank you. thank you very much.

Operator

thank you very much. The next question is from Morgan Stanley's Pravaine Chordary. please.

Timothy Magic -- Director

thank you. Lawrence, Jeff. And David too. I have a question immediately. One is about the opening of Hong Kong, which is the most important in the short term to help Macau. And the second is a numerical question. Regarding the opening of Hong Kong, I was aiming to open with Singapore in December, but before either Macau or China opens, Hong Kong needs to be zero for seven consecutive days. There was a comment that there was. Please tell me the latest information whether it has changed or whether the situation has improved considerably thanks to vaccination. What is the realistic assumption that all Hong Kong and Macau residents will be vaccinated? What is the realistic assumption that all Hong Kong and Macau people get vaccinated? Then there are numerical questions.

Operator

Billy N-Bank of Americ a-Analyst

thank you. thank you very much.

Call participants:

Timothy Magic -- Director

Lawrence Ho Yau Lun -- Chairman and Chief Executive Officer

The gaming phase has been expanded, and new attractions other than gaming, including cinnplex, world's largest indoor outdoor water park, luxury restaurant, and stat e-o f-th e-art MICE space. To further enhance the competitiveness in Macau's premium mass segments, upgrade work will continue in City of Dreams. And the completely renovated NUWA will open at the end of March. We are closing this tower in the near future to the middle, reducing the number of keys, transforming them into fiv e-star hotels in all rooms, and aiming for the renewal opening in 2023. With this renovation, a 5-star hotel will be born in all Tower of City of Dreams, and the position as a leading premium hotel in Macau will increase. At Cyprus, the development of City of Dreams Mediterranean is progressing. City of Dreams Manila has been conducting a hospitality business on a limited trial ru n-based based on Pagcor's approval, and has recorded a positive eBitDa. In the third quarter of 2020, the demand for domestic gaming at Cyprus casinos, while the increase in COVID incidents, the Cyprus government announced the second closing in the fourth quarter. As a result, our casino was partially closed on November 13 and was completely closed on December 1. Despite the global pandemic, Melco is still working on a global development program. The next main project in Macau is the second stage of Studio City and is currently under construction. Once the second period expansion work is completed, the number of hotels in Studio City will increase by about 60 %, and two new hotel tower will provide a luxury hotel room with about 900 rooms.

On a year-over-year basis, the change in the allowance for credit losses negatively impacted EBITDA by approximately $11 million. Additionally, fourth quarter 2020 EBITDA was positively impacted by a bonus reversal of $16 million. Turning to the balance sheet: To optimize its capital structure, Studio City issued $750 million of 5% senior notes due 2029 in January. The proceeds will be used to refinance $600 million of 7. 25% senior notes due 2024, with the remaining proceeds to be used for second phase capital expenditures and general corporate purposes. The transaction lowered average borrowing rates and extended Studio City's maturity profile, with its next significant debt maturity due in 2025. Also in January, Melco took advantage of favorable market conditions to redeem an additional $250 million of its 5. 375% senior notes due 2029. The tap was priced at zero-3. 4 times par, resulting in an effective borrowing rate of approximately 4. 9%. Cash on hand at the end of December was approximately $1. 8 billion.

Jeffrey Stuart Davi s-Executive Vice President and Supreme Finance Officer

And I think we're finally seeing light at the end of the tunnel. If you look at the spending behavior in China, it's very impressive, given how successful China and Macau have been in controlling the virus. And then today we also had the news that flights between Taiwan and Macau have resumed. I think it's all these little pieces coming together that are really showing us how strong the end of the Lunar New Year has been. What do you think, David?

Operator

Hopefully, normalization may be seen in the second quarter or the end of the second quarter. Macau, Hong Kong and China have a very scientific approach. Macau, Hong Kong and China have a very scientific approach. Macau clearly tells Hong Kong that if Macau and China have begun to have the hygiene norms that are now shared, and that less than 10 cases will be infected in the field, the passage will be resumed. I think. Hong Kong is really approaching this number now. So, for the first time in the last 12 months, it has been more positive than negative.

thank you. thank you very much.

Jeffrey Stuart Davi s-Director Vice President and Supreme Finance Officer

Finally, as for the bad debts, we, as you know, records bad debts every quarter to provide customers and investors to provide transparency. Well, from the normal level, it is certainly rising. This reflects the business status of Macau last year. As you know, it's a very tough situation. Therefore, I think that the amount of money for the loan for the debt will be normalized for 2021 and over 2021. The second question is about Macau's OPEX.