Inside Asian Gaming

inside asian gaming JUNE 2015 28 assets, luxury condos, villas, jets, cars, and the like. Often, the debtor does not have the cash to settle the marker/credit owed, but instead tries to settle with other such assets. In the cases where there is no money or assets to settle debts, Mr Tong says “the debtor normally would have to work for the junket agent by recruiting other players, and use the rolling commission to try to pay off their gaming debt. I have heard of debtors working for the junket agent for years before clearing their debt.” “In addition to legal collection services, we have also been requested by many gaming clients to improve their VIP due- diligence, credit/marker management, risk management services and advisory services,” notes Mr Tong. “Working in partnership with law firms, we provide a full range of cross-border investment advisory and legal services in Hong Kong, Macau, and China, including: collection and recovery services; accounts recovery; debt collection; payment negotiation/mediation; credit management consulting; cross border collection; due diligence; fraud detection; problem solving; debt management consulting services; and mediation and negotiation services.” though, is that Beijing might… move to do something about it.” Mr Yu complains, “There have been no countermeasures from Macau” to prevent junkets from taking players overseas, though he doesn’t suggest steps authorities might take. Jurisdictions such as the Philippines, Cambodia, Korea and Vietnam have lower tax rates than Macau’s 39%. Lower taxes enable operators to offer junkets better deals than Macau’s capped 1.25% commission rate or revenue shares in the low-to-mid 40% range. For example, NagaWorld revenue share to junkets begins at 70%. Higher payments enable junket promoters to give bigger rebates to players and earn more profit. VIPs still coming to Macau are “mid- to low-tier players,” says Mr Yu, who helped develop AMAX as a junket consolidation powerhouse before leaving in 2009. Most current players are small business owners, he says. “No more government officials,” and no more coal mine owners, who used to be his biggest gamblers, either, he says since the latter have now “gone broke.” Player check- ins that used to begin at HK$1 million (US$129,000) to HK$2.5 million are now smaller. Customers are also coming less frequently, down from visiting monthly to every six weeks or two months. “Their earning capability has been reduced,” he says, amid China’s economic slowdown. Most VIP players are men aged 40 to 65, according to Mr Yu, and their average life-cycle is two years. “After two years, they’re broke and they need some time to recover,” he says. “Maybe some of them drop from VIP room to mass market. It’s not like they’ve totally avoided gambling, but they’re gambling less.” Bad debt, the key issue Suncity’s Mr Chau cited, remains a problem for VIP promoters, with gambling debts not legally enforceable through mainland courts. Mr Yu has long advocated compiling a “blacklist” of VIP deadbeats that could be used to name and shame bad debtors as well as prevent further lending to them by other junket promoters. He notes that China’s courts have begun to publish lists of people with debt judgments against them. In Macau, a blog called Wonderful World tried publishing the names of VIP bad debtors in 2013 but was blocked by local authorities. Mr Yu says he’s reduced his bad debt problems during the downturn through more conservative credit policies. He contends even bad debts are less of a problem for junkets taking players overseas. “There’s always bad debt everywhere, but the tax is lower, the [operating] cost is lower, so the [cost of] bad debt is lower.” Insights “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 “In addition to legal collection services, we have also been requested by many gaming clients to improve their VIP due- diligence, credit/marker management, risk management services and advisory services.”