Inside Asian Gaming

JUNE 2015 inside asian gaming 27 Insights “On the basis of information gleaned from public court records and my private conversations with casinos, VIP clubs, money lending companies, micro- financing companies, and law firms, I believe there will be increasing credit default issues in the gaming industry, especially in the VIP sector,” notes Pacific Financial Services Ltd Director Tony Tong. succumbed to its protracted and ongoing slump. “There will obviously be domino effects as a result of major defaults like those of Huang Shan. On the basis of information gleaned from public court records and my private conversations with casinos, VIP clubs, money lending companies, micro-financing companies, and law firms, I believe there will be increasing credit default issues in the gaming industry, especially in the VIP sector,” notes Mr Tong. Huang Shan’s disappearance has caused a lot of “triangular debt” issues, explains Mr Tong. “‘Triangle debt’ is a well-known phrase in China, referring to a default that occurs between one party and another in the country’s informal credit system because a third party can’t or won’t pay I foresee an increasing number of defaults in the junket agency network and among VIP players due to such triangle debts, triggered initially in part by Huang Shan.” Mr Tong adds: “the law firms, credit investigation and collection agencies, and bankruptcy trustees we work in partnership with are dealing with a fast-growing number of credit-default, liquidation and collection issues coming from the gaming industry. We have been requested by our clients to help them resolve either their, or their clients’, non-performing loan and aging accounts receivable issues by trying to find new investors to invest in the non-performing assets and/or provide asset collateral pledges and asset-backed securities. Most of the non-performing assets are tied to real estate, mining Non-Mass Exodus VIP operator says big players join overseas migration Competition from other destinations, big players deserting Macau in the face of increased official scrutiny and bad debts are hitting Macau junket promoters hard, a VIP room operator says. His observations amplify those of Suncity Group chairman Alvin Chau who lamented in an article published in February that junket promoters are bearing the brunt of the gaming revenue slump—the link to the original Chinese language version of the article is available on the Pacific Financial Group Facebook site, www.facebook.com/ pacificfinancialgroup . “Surrounding jurisdictions are taking customers away,” CCUE VIP Club founder Yu Yio Hung says. VIP promoters are bringing customers that would normally play in Macau to Manila, Jeju island in South Korea and NagaWorld in Phnom Penh. Mr Yu adds NagaWorld has opened new rooms for Macau junket promoters Dore and Century last month, joining Asian Nations and Suncity Group already doing business there. “The big clubs are setting up presences everywhere,” Mr Yu says. Junkets’ overseas activities have raised concern for the casino management of Altira, where CCUE brings players to VIP tables shared with other clubs. Mainland authorities’ increased scrutiny of Macau visitors as part of President Xi Jinping’s anti-corruption campaign is driving the exodus overseas. Mr Yu says many VIP players “don’t feel safe coming to Macau” because they think they’re being watched. Applying for entry to Macau means mainland authorities “begin to look at you,” he says. “If they see that you’ve been going to Macau a lot, they will not approve your visa.” In contrast, visa procedures are “very easy” for many alternative destinations, some offering multiple entry visas for Chinese travelers and Jeju giving visa-free access to Chinese travelers. Mainland officials have not began scrutinizing travel to other gaming jurisdictions, Mr Yu says, though they could. Casino executives in other jurisdictions have largely downplayed the impact of China’s anti-corruption measures on their increased Macau junket business. They claim Macau junkets bring low tier players. However, according to Mr Yu, even big players are “going to other places,” rather than sitting on the sidelines or substituting stock market trading for casino gaming as some suggest. An article in Hong Kong’s South China Morning Post last month quoted an unnamed “gaming insider” reporting concern in “official circles in Macau over the amounts of money being diverted to other jurisdictions by junkets and casino groups.” Along with anxiety over possible banking violations and money laundering, “The big fear, >>