Inside Asian Gaming

July 2011 | INSIDE ASIAN GAMING 17 M acao Studio City was first conceived as a US$2 billion project with an opening date in 2009. Under the revamped plan, that opening date is now likely to be 2015. The original partners in the project were brought together by David Friedman, a former senior executive of Las Vegas Sands Corp who played a key role in the development of The Venetian Macao. The original structure of the partnership was complex. That seems to have been a contributory factor in creating difficulties thatultimatelyledtolitigationbetweenHong Kong-listed eSun Holdings, a conglomerate specialising in entertainment, and New Cotai LLC, a consortium owning 40% of the project and including Mr Friedman and US-based hedge funds Silver Point Capital and Oaktree Capital Management. The first public sign of disagreement was the global financial crisis of late 2008, when eSun faced liquidity issues and indicated it wanted out of the project—but could not agree with the other partners on the valuation of its stake. In June this year, action in the Hong Kong courts between eSun and New Cotai was dropped after MPEL—under whose gaming licence any casino at MSC would operate— came in and brokered a deal. MPEL agreed to pay eSun US$260 million for its stake in Macao Studio City, and agreed to pay the remaining partners in New Cotai LLC a total of US$100 million over three years. In return, MPEL receives a 60% equity stake in the project. Two of the original partners—eSun and Singapore’s CapitaLand (with whom New Cotai was not in dispute) are now completely out of the project. That leaves a much cleaner structure, with MPEL on 60% and New Cotai on 40%. Although the revived project will be constrained to some extent by the foundation work already put in, Mr Ho stressed last month that the MSC scheme would undergo a redesign and he anticipated it would cost US$1.7 billion to complete—on the face of it making it a US$1.8 billion project in total when the foundation work is factored in. Hard Road Macao Studio City has had a long gestation—now investors hope for an easier birth Former Japanese prime minister Yukio Hatoyama (left of picture) discusses the options for casinos in Japan at a meeting in Tokyo on 21st June A Sure Bet Log onto www.asgam. com for the latest industry intelligence and a subscription to our digital edition—all absolutely free quarter, according to DICJ statistics. The opening of Galaxy Macau added another 450 tables, taking the market tally to 5,303. Sands China acting CEO Michael Leven told an earnings conference call late last year that the Macau government had indicated it would be allowed at least 400 tables at its Cotai 5 and 6 sites. If Cotai 5 and 6 were to open in full before the end of 2013, that would push the market beyond the current table cap limit. The table cap principle is probably more a rule of thumb than an absolute ceiling. But it was a shock to the market and to investors when it was announced in early 2010 and did create some nervousness about the trajectory of Macau. It was a clear sign that the Macau government wasn’t simply willing to leave things to the market—as some investors may have hoped—and would intervene at a micro level if it felt there was a social and political need to do so. And with at least three other new gaming projects mooted for Cotai in the next five years—aside from Macao Studio City and Sands China’s Cotai 5 and 6—then further imposition of table caps can’t be ruled out. In Focus