Dominating discussions around Macau’s casino industry over much of the past 12 months has been the looming expiration of gaming licenses and the amendments being made to the gaming law ahead of new concessions being granted.
While the Macau SAR Government has recently extended the current 20-year concession period by six months until 31 December 2022 – at a cost of MOP$47 million (US$5.9 million) per concessionaire – it has also been busy ensuring the concessionaires pay their dues under the new gaming law via increased liquidity requirements and an effective 1% increase in government levies on gross gaming revenues.
Yet all of this comes at a time when concessionaires can least afford it. And after two-and-a-half years spent printing massive losses due to the COVID-19 pandemic, the question that once seemed unfathomable must now be asked: Are Macau’s casino operators running out of money?
In a recent note, Morgan Stanley analysts estimated that Macau’s six concessionaires were losing a combined US$800 million per quarter, with their combined debts since the start of the pandemic rising from around US$5 billion to more than US$20 billion. And this was before the June COVID outbreak in Macau which has many fearing that gross gaming revenues will decline even further to near-zero for the foreseeable future.
Under such a scenario, at least two concessionaires – Sands China and SJM – are facing shortened liquidity runways of just nine months according to JP Morgan, even with SJM having just weeks earlier finally agreed a long-awaited refinancing of existing loans.
The new reality for concessionaires was highlighted by Wynn Macau Ltd which announced on 14 June that it had been provided a US$500 million revolving loan facility by its parent, Wynn Resorts. This, analysts explained, was likely a sign that Macau’s once prosperous casino operators are now so deep in the hole that banks are no longer eager to help bail them out.
The good news for the concessionaires – cash-rich Galaxy Entertainment Group aside – is that most have strong parent firms ready and willing to lend a hand where needed, much like in the case of Wynn. And, as we’ve seen in markets like the United States, Australia and the Philippines, pent-up demand upon reopening is a very real thing.
But, after almost three years of pain, it seems those operators who win a new 10-year license can expect to spend most of that time paying off their newly accrued debts.
Ben Blaschke
Managing Editor
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