The latest draft of Macau’s gaming law amendment bill has clarified that in future any Macau licensee will need to reserve MOP5-billion (circa US$620-million) in capital, at all times during the course of the coming 10-year concessions. The liability is spelled out in Article 17 of the draft law, as issued on Wednesday.
The new law – expected to have its second and final reading next week at the earliest in Macau’s Legislative Assembly – is due to come into effect at the same time as a new set of 10-year concessions. They would be activated at some point after the current ones expire on December 31, an expected rollover date from the original June 26 expiry.
Prior to Wednesday’s draft bill update, there had been “a debate if this MOP5-billion” capital requirement “must be paid in cash, or if an operator is allowed to use the existing ‘book value’ of equity,” amassed from its previous concession rights, said a note that day from brokerage JP Morgan Securities (Asia Pacific) Ltd.
But JP Morgan analysts said in the first of two Wednesday notes about the gaming law draft: “The new wordings” in Article 17, “make it clear to us that operators will need to prepare MOP5 billion in cash – or deposits – and keep net asset value above MOP5 billion at all times during the concession period.”
They added, referring to a Tuesday filing by Macau casino operator Wynn Macau Ltd: “This probably explains why Wynn Macau recently boosted its liquidity capacity by US$500 million via a revolving facility from its parent Wynn Resorts [Ltd] despite what we view as ample liquidity for normal operation.”
Morgan Stanley Asia Ltd also took note of the gaming law amendment’s latest draft requiring a gaming licensee’s company capital needing to be “at least MOP5 billion”.
“The draft states it now needs to remain above this level at all times during the concession term,” observed the Morgan Stanley team.
In a follow up note on Wednesday, JP Morgan mentioned the capital requirement in the context of news that another current Macau operator, SJM Holdings Ltd, had received approval from the Macau government and a syndicate of banks for a HKD19-billion (US$2.4-billion) refinancing package.
“This was a much-needed financing to prepare for license bidding – that requires circa HKD5-billion in cash and deposit,” stated JP Morgan’s analysts.
