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United States securities and exchange commission logo
December 23, 2021
Kevin Richard Benning
Property General Manager
STUDIO CITY INTERNATIONAL HOLDINGS Ltd
36th Floor, The Centrium
60 Wyndham Street
Central
Hong Kong
Re: STUDIO CITY
INTERNATIONAL HOLDINGS Ltd
Registration
Statement on Form F-3
Filed November 30,
2021
File No. 333-261406
Dear Mr. Benning:
We have limited our review of your registration statement to
those issues we have
addressed in our comments. In some of our comments, we may ask you to
provide us with
information so we may better understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form F-3 filed November 30, 2021
Cover Page
1. Please disclose
prominently on the prospectus cover page that you are not a Chinese
operating company but a
Cayman Islands holding company with operations conducted by
your subsidiaries and
through contractual arrangements with a variable interest entity
(VIE) based in China
and that this structure involves unique risks to investors. If true,
disclose that these
contracts have not been tested in court. Explain whether the VIE
structure is used to
provide investors with exposure to foreign investment in China-based
companies where Chinese
law prohibits direct foreign investment in the operating
companies, and disclose
that investors may never hold equity interests in the Chinese
Kevin Richard Benning
FirstName LastNameKevin Richard Benning
STUDIO CITY INTERNATIONAL HOLDINGS Ltd
Comapany23,
December NameSTUDIO
2021 CITY INTERNATIONAL HOLDINGS Ltd
December
Page 2 23, 2021 Page 2
FirstName LastName
operating company. Your disclosure should acknowledge that Chinese
regulatory
authorities could disallow this structure, which would likely result
in a material change in
your operations and/or value of your common stock and ADSs, including
that it could
cause the value of such securities to significantly decline or become
worthless. Provide a
cross-reference to your detailed discussion of risks facing the
company and the offering as
a result of this structure.
2. Provide prominent disclosure about the legal and operational risks
associated with being
based in or having the majority of the company s operations in
China, Hong Kong, and
Macau. Your disclosure should make clear whether these risks could
result in a material
change in your or the target company s post-combination operations
and/or the value of
your common stock and ADSs or could significantly limit or completely
hinder your
ability to offer or continue to offer securities to investors and
cause the value of such
securities to significantly decline or be worthless. Your disclosure
should address how
recent statements and regulatory actions by China s government, such
as those related to
the use of variable interest entities and data security or
anti-monopoly concerns, has or
may impact the company s ability to conduct its business, accept
foreign investments, or
list on an U.S. or other foreign exchange. Please disclose whether
your auditor is subject
to the determinations announced by the PCAOB on December 16, 2021 and
whether and
how the Holding Foreign Companies Accountable Act and related
regulations will affect
your company. Prospectus summary should address, but not necessarily
be limited to, the
risks highlighted on the prospectus cover page.
3. Clearly disclose how you will refer to the holding company,
subsidiaries, and any VIEs
you may utilize to conduct business in China, Macau, or Hong Kong when
providing the
disclosure throughout the document so that it is clear to investors
which entity the
disclosure is referencing and which subsidiaries or entities are
conducting the business
operations. Please also Refrain from using terms such as we or
our when describing
activities or functions of a VIE, and disclose clearly the entity
(including the domicile) in
which investors are purchasing their interest.
4. Provide a description of how cash is transferred through your
organization and disclose
your intentions to distribute earnings or settle amounts owed under
the VIE agreements.
State whether any transfers, dividends, or distributions have been
made to date between
the holding company, its subsidiaries, and consolidated VIEs, or to
investors, and quantify
the amounts where applicable. Provide cross-references to the
condensed consolidating
schedule and the consolidated financial statements.
About This Prospectus, page 1
5. Disclose clearly that the company uses a structure that involves a VIE
based in China and
what that entails and provide early in the summary a diagram of the
company s corporate
structure, including who the equity ownership interests are of each
entity. Describe all
contracts and arrangements through which you purport to obtain
economic rights and
exercise control that results in consolidation of the VIE s
operations and financial results
Kevin Richard Benning
FirstName LastNameKevin Richard Benning
STUDIO CITY INTERNATIONAL HOLDINGS Ltd
Comapany23,
December NameSTUDIO
2021 CITY INTERNATIONAL HOLDINGS Ltd
December
Page 3 23, 2021 Page 3
FirstName LastName
into your financial statements. Identify clearly the entity in which
investors are purchasing
their interest and the entities in which the company s operations
are conducted. Describe
the relevant contractual agreements between the entities and how this
type of corporate
structure may affect investors and the value of their investment,
including how and why
the contractual arrangements may be less effective than direct
ownership and that the
company may incur substantial costs to enforce the terms of the
arrangements. Disclose
the uncertainties regarding the status of the rights of the Cayman
Islands holding company
with respect to its contractual arrangements with the VIE, its
founders and owners, and the
challenges the company may face enforcing these contractual agreements
due to
uncertainties under Chinese law and jurisdictional limits.
6. We note your disclosure on page 84 of your annual report on Form 20-F
for the fiscal year
ended December 31, 2020, that you control and receive economic
benefits of Studio City
Entertainment Limited, Studio City Holdings Hotels Limited, and Studio
City Holdings
Developments Limited s business operations through VIE agreements.
We also note the
disclosure that you are the primary beneficiary of the VIE. However,
you or your
investors do not have an equity ownership in, direct foreign
investment in, or control
through such ownership/investment of the VIE. As such, when describing
the design of
the VIE agreements and related outcome, please refrain from implying
that the VIE
agreement is equivalent to an equity ownership in the business of the
VIE. Any references
to control or benefits that accrue to you because of the VIE should be
limited to and
clearly describe the conditions you met for consolidation of the VIE
under U.S. GAAP
and your disclosure should clarify that, for accounting purposes, you
will be the primary
beneficiary. In addition, your disclosure should note, if true, that
the agreements have not
been tested in a court of law.
7. In your summary, disclose the risks that your corporate structure and
being based in or
having the majority of the company s operations in China poses to
investors. In particular,
describe the significant regulatory, liquidity, and enforcement risks
with cross-references
to the more detailed discussion of these risks in the prospectus. For
example, specifically
discuss risks arising from the legal system in China, including risks
and uncertainties
regarding the enforcement of laws and that rules and regulations in
China can change
quickly with little advance notice; and the risk that the Chinese
government may intervene
or influence your operations at any time, or may exert more control
over offerings
conducted overseas and/or foreign investment in China-based issuers,
which could result
in a material change in your operations and/or the value of the
securities you are
registering for sale. Acknowledge any risks that any actions by the
Chinese government to
exert more oversight and control over offerings that are conducted
overseas and/or foreign
investment in China-based issuers could significantly limit or
completely hinder your
ability to offer or continue to offer securities to investors and
cause the value of such
securities to significantly decline or be worthless.
8. Disclose each permission or approval that you, your subsidiaries, or
the VIEs are required
to obtain from Chinese authorities to operate your business and to
offer the securities
Kevin Richard Benning
FirstName LastNameKevin Richard Benning
STUDIO CITY INTERNATIONAL HOLDINGS Ltd
Comapany23,
December NameSTUDIO
2021 CITY INTERNATIONAL HOLDINGS Ltd
December
Page 4 23, 2021 Page 4
FirstName LastName
being registered to foreign investors. State whether you, your
subsidiaries, or VIEs are
covered by permissions requirements from the China Securities
Regulatory Commission
(CSRC), Cyberspace Administration of China (CAC) or any other
governmental agency
that is required to approve the VIE s operations, and state
affirmatively whether you have
received all requisite permissions or approvals and whether any
permissions or approvals
have been denied. Please also describe the consequences to you and
your investors if you,
your subsidiaries, or the VIEs: (i) do not receive or maintain such
permissions or
approvals, (ii) inadvertently conclude that such permissions or
approvals are not required,
or (iii) applicable laws, regulations, or interpretations change and
you are required to
obtain such permissions or approvals in the future.
9. Provide a clear description of how cash is transferred through your
VIE
structure. Disclose your intentions to distribute earnings or settle
amounts owed under the
VIE agreements. Quantify any cash flows and transfers of other assets
by type that have
occurred between the holding company, its subsidiaries, and
consolidated VIEs, and
direction of transfer. Quantify any dividends or distributions that a
subsidiary or
consolidated VIE have made to the holding company and which entity
made such transfer,
and their tax consequences. Similarly quantify dividends or
distributions made to U.S.
investors, the source, and their tax consequences. Describe any
restrictions on foreign
exchange and your ability to transfer cash between entities, across
borders, and to U.S.
investors that may apply. Describe any restrictions and limitations on
your ability to
distribute earnings from your businesses, including subsidiaries
and/or consolidated VIEs,
to the parent company and U.S. investors as well as the ability to
settle amounts owed
under the VIE agreements.
10. We note that the consolidated VIEs constitute a material part of your
consolidated
financial statements. Please provide in tabular form a condensed
consolidating schedule
that disaggregates the operations and depicts the financial position,
cash flows, and results
of operations as of the same dates and for the same periods for which
audited consolidated
financial statements are required. The schedule should present major
line items, such as
revenue and cost of goods/services, and subtotals and disaggregated
intercompany
amounts, such as separate line items for intercompany receivables and
investment in
subsidiary. The schedule should also disaggregate the parent company,
the VIEs and its
consolidated subsidiaries, the WFOEs that are the primary beneficiary
of the VIEs, and an
aggregation of other entities that are consolidated. The objective of
this disclosure is to
allow an investor to evaluate the nature of assets held by, and the
operations of, entities
apart from the VIE, as well as the nature and amounts associated with
intercompany
transactions. Any intercompany amounts should be presented on a gross
basis and when
necessary, additional disclosure about such amounts should be included
in order to make
the information presented not misleading.
11. Disclose that trading in your securities may be prohibited under the
Holding Foreign
Companies Accountable Act if the PCAOB determines that it cannot
inspect or investigate
completely your auditor, and that as a result an exchange may
determine to delist your
Kevin Richard Benning
FirstName LastNameKevin Richard Benning
STUDIO CITY INTERNATIONAL HOLDINGS Ltd
Comapany23,
December NameSTUDIO
2021 CITY INTERNATIONAL HOLDINGS Ltd
December
Page 5 23, 2021 Page 5
FirstName LastName
securities. Disclose whether your auditor is subject to the
determinations announced by
the PCAOB on December 16, 2021. Please also include a Risk Factor in
this regard. In
your Risk Factor, please further disclose that the United States
Senate has passed the
Accelerating Holding Foreign Companies Accountable Act, which, if
enacted, would
decrease the number of non-inspection years from three years to
two years, and thus,
would reduce the time before your securities may be prohibited from
trading or delisted.
Also disclose in the Risk Factor that the Commission adopted rules to
implement the
HFCAA and that, pursuant to the HFCAA, the PCAOB has issued its report
notifying the
Commission of its determination that it is unable to inspect or
investigate completely
accounting firms headquartered in mainland China or Hong Kong.
Risk Factors, page 9
12. Revise your risk factor section to acknowledge that if the PRC
government determines
that the contractual arrangements constituting part of your VIE
structure do not comply
with PRC regulations, or if these regulations change or are
interpreted differently in the
future, your shares may decline in value or be worthless if you are
unable to assert your
contractual control rights over the assets of your PRC subsidiaries
that may conduct all or
substantially all of your operations.
13. Given the Chinese government s significant oversight and discretion
over the conduct of
your business, please revise to separately highlight the risk that the
Chinese government
may intervene or influence your operations at any time, which could
result in a material
change in your operations and/or the value of your common stock or
ADSs. Also, given
recent statements by the Chinese government indicating an intent to
exert more oversight
and control over offerings that are conducted overseas and/or foreign
investment in China-
based issuers, acknowledge the risk that any such action could
significantly limit or
completely hinder your ability to offer or continue to offer
securities to investors and
cause the value of such securities to significantly decline or be
worthless.
14. In light of recent events indicating greater oversight by the
Cyberspace Administration of
China over data security, particularly for companies listed on a
foreign exchange, please
revise your risk factor section starting on page 9 to disclose how
this oversight impacts
your business and your offering and to what extent you believe that
you are compliant
with the cyber security regulations or policies that have been issued
by the CAC or any
other PRC controlled entity.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
Kevin Richard Benning
STUDIO CITY INTERNATIONAL HOLDINGS Ltd
December 23, 2021
Page 6
Please contact Patrick Costello at 202-551-8742 or Mary Beth Breslin at
202-551-3625
with any other questions.
Sincerely,
FirstName LastNameKevin Richard Benning
Division of Corporation Finance
Comapany NameSTUDIO CITY INTERNATIONAL HOLDINGS Ltd
Office of Real Estate & Construction
December 23, 2021 Page 6
cc: Tim Cruickshank
FirstName LastName