Macau Casinos Struggling to Borrow From Banks as Pandemic Pains Continue, Says Morgan Stanley

  • Macau casinos are still struggling amid a surge in COVID-19 cases in mainland China
  • Wynn Macau announced it has access to a $500m credit facility from its parent company
  • Analysts believe it’s only a matter of time before other operators do something similar
  • Operators have to deal with mounting debt, license renewals, and ongoing COVID issues
Macau money
Morgan Stanley analysts believe that Macau’s casino operators might have issues borrowing from banks due to ongoing pandemic woes. [Image: Shutterstock.com]

Struggling to return to normal

According to Morgan Stanley analysts, casino operators in Macau may be having issues borrowing from banks amid the continuing impact of COVID-19 in the region.

Unlike casinos in the US which have bounced back strongly following their own pandemic woes, in many cases even surpassing pre-pandemic revenue levels, casinos in Macau haven’t had much success in returning to growth.

monthly gaming revenue is still significantly below 2019 levels

A recent surge in COVID-19 cases across mainland China and other nearby regions has had a substantial impact on the world’s largest gambling hub. Macau monthly gaming revenue is still significantly below 2019 levels. With significant travel restrictions in place, casino operators in the special administrative region will likely continue to struggle in the coming weeks and months.

Turning to their parent companies

Despite no official confirmation, Morgan Stanley analysts outlined their belief on Wednesday that the worsening liquidity of gambling operators in Macau will lead to issues borrowing funds. On Tuesday, news broke that Wynn Macau had received a $500m revolving loan facility from its parent company, Wynn Resorts. It will utilize the money as working capital to help steady the ship amid mounting losses.

Morgan Stanley analysts believe that it is likely only a matter of time before other concessionaires, such as SJM Holdings and Sands China, announce similar financing arrangements with their respective parent companies.

SJM Holdings, Galaxy Entertainment, Melco Resorts, MGM China, Sands China, and Wynn Macau are the region’s concessionaires.

Many obstacles

It is a precarious time for the casino licensees in Macau. Combined, they are reportedly losing as much as $800m each and every quarter. The situation doesn’t look like improving any time soon either, with expectations that Q2 gross gaming revenue will only amount to 12% of Q2 2019 levels.

the six casino operators set to receive a six-month license extension

Their licenses are also up for renewal at the end of the year, with each of the six casino operators set to receive a six-month license extension from the previous June 2022 expiration date. While it is likely that all of the current concessionaires will acquire renewals, they will hope that their fortunes turn a corner sooner rather than later.

The six casino operators are set to have $25bn in net debt by the end of 2021, significantly up from the $5bn net debt figure at the end of 2019. Legislation in the works looks likely to also put stricter controls on operators.