MGM China Secures $750m Loan as Macau Market Continues to Struggle

  • MGM Resorts International provided the loan through a subordinated revolving loan facility
  • The loan allows MGM China to maintain its financial position with access to future funding
  • Macau’s casinos have struggled with travel restrictions since the beginning of the pandemic
  • Casino licenses in Macau expire at the end of the year, with the application process ongoing
Person lending another person cash
MGM China has secured a $750m loan from its parent company amid ongoing pandemic-related struggles. [Image: Shutterstock.com]

A little help

MGM China has received a $750m loan from its parent company as the Macau casino market continues to struggle. According to a Hong Kong Stock Exchange filing, MGM China will get the funds via a subordinated revolving loan facility. The loan agreement between MGM Resorts International and its MGM China subsidiary was signed on Thursday.

interest rate at 4% per annum

The loan facility will be active for two years, with the loan’s interest rate at 4% per annum.

In the filing, MGM China said that the loan agreement shows how confident the two parties are in the long-term potential for growth in the Macau market. The firm said the additional financing capabilities will help it maintain its financial position and be able to fund future requirements, such as working capital.

Continued issues

Macau’s casino sector has struggled since the beginning of the COVID-19 pandemic. Travel restrictions have been in place for most of the time, which has led to significantly lower visitor numbers. During Q3 2022, gross gaming revenue was just 8% of pre-pandemic levels.

Most of the special administrative region’s casino operators have been experiencing significant losses. In its most recently reported quarter up to the end of September, MGM China’s earnings before interest, tax, depreciation, and amortization (EBITDA) loss reached $68.2m. Its occupancy was just 21% in the three-month period and it had a total market share of 13%.

Like MGM China, other casino operators have had to look outwards for funds. In June, Wynn Macau announced it had access to a $500m credit facility from its parent company. Meanwhile, Morgan Stanley warned that casino operators would struggle to secure loans from actual banks due to worsening liquidity.

Other problems

Another source of concern for casino operators in Macau is that their licenses are currently up for renewal. The existing licenses will expire at the end of the year, with each of the six concessionaries having to prove that they are worthy of receiving a new ten-year license.

seven contenders for the six licenses

The application process has already begun, Onlookers expect that the successful candidates will be informed that they have earned a license before the end of 2022. There are seven contenders for the six licenses after Genting Group also threw its hat into the ring.

China has also enforced a crackdown on casino partnerships with junket operators who bring high roller business in from overseas. Stricter laws recently came into place regarding this. The rules also place more compliance obligations on operators.