Macau Legend Development Ltd has outlined material uncertainties relating to its ability to continue as a going concern ahead of a scheduled HK$135 million (US$17.3 million) loan repayment falling due this month.
The update formed part of the company’s 1H24 results announcement, with Macau Legend reporting a HK$109.9 million (US$14.1 million) net loss for the period – improved from a HK$182.5 million (US$23.4 million) loss a year earlier.
Macau Legend owns the Macau Fisherman’s Wharf precinct on the Macau peninsula in which it operates a number of hotels as well as the casino at Legend Palace on behalf of SJM Resorts S.A.
Outlining what appears to be a dire financial situation, the company said its net liabilities currently total HK$2.50 billion (US$321 million), with bank and other borrowings of HK$2.41 billion (US$309 million) falling due for repayment within the next 12 months. Some, it added, are already payable on demand.
However, while net assets total HK$3.55 billion (US$455 million), its cash and cash equivalents amounted to just HK$65.1 million (US$8.3 million) as of 30 June 2024.
“As a result of non-compliance of certain loan covenants by the Group, [Macau Legend’s] total outstanding bank borrowings of HK$2.07 billion (US$265 million) become immediately repayable if demanded by the creditor banks, of which an instalment of loan principal amounting to HK$135.0 million will be due for repayment in September 2024 according to the original loan repayment schedule,” the independent auditor found in an extract included within Macau Legend’s 1H24 financial report.
“These conditions, together with other matters … indicate the existence of material uncertainties which cast significant doubt on the Group’s ability to continue as a going concern.”
In response, Macau Legend said its directors are actively seeking support from the banks for an amicable solution in respect of the non-compliance of loan covenants and extension of repayment date of the upcoming instalment. They are also seeking ongoing support from its main shareholders and may consider selling off the company’s assets outside of Macau with a view to improving the group’s working capital.
Macau Legend recently disposed of its Laos casino, Savan Vegas, in a US$45 million deal.
The company’s 1H24 results included revenue from continuing operations of HK$390.4 million (US$50.1 million), up 16.5%, year-on-year, primarily from gaming services at Legend Palace, with Adjusted EBITDA of HK$85.3 million (US$10.9 million) up from HK$52.2 million (US$6.7 million) a year earlier.
“Looking forward to the second half of 2024, the Group will continue to execute its strategies to get better equipped to seize opportunities and to overcome challenges,” it said.
“Resources will continue to be allocated to optimize the facilities of the Macau Fisherman’s Wharf to enhance exclusive experience in the waterfront complex, as well as its flexibility to host large-scale events.
“Moreover, the market generally expects that the United States will soon be starting to commence interest rate cut; if this goes as expected, it will not only benefit the further recovery in tourism related industries as a whole, but also enable the Group to spare more cash flow for future development.”