Casino operator MGM China Holdings Ltd will pay MOP20 million (US$2.47 million) to SJM Holdings Ltd in connection with the extension of its Macau gaming sub-concession to June 26, 2022, the two companies said in separate filings to the Hong Kong Stock Exchange on Friday.
Each company will also have to make major financial commitments to the local government regarding rights and conditions applicable to local workers.
Earlier on Friday, the Macau government said it had approved a request to extend the gaming concessions of SJM Holdings and MGM China for little over two years. Their respective licences were set to expire in March 2020.
SJM Holdings concession was granted for 18 years, giving leeway for the government to authorise one or more extensions up to the 20-year limit. MGM China – as a sub-concessionaire – was bound to the same licence deadline. The Macau casino sub-concession used by MGM China was purchased in 2005 for US$200 million from SJM Holdings.
Such extension aligns the terms of these two gaming concessions with the other four operators in the Macau market, the licences of which are due to expire in June 2022.
The new contracts with units of respectively SJM Holdings and MGM China were signed on Friday morning, according to the government. MGM China is the Macau unit of U.S.-based casino operator MGM Resorts International.
Commenting on the licence extension, Jim Murren, chairman and chief executive of MGM Resorts, said in a separate press release: “We are grateful for the support of the Macau government to have authorised and extended our sub-concession to now align with the rest of the market.”
He added: “We continue to believe in the long-term success of Macau. As the region continues to grow into an international leisure and tourism destination, MGM China remains committed to supporting this vision…”
In Friday’s filing, the SJM Holdings board said the concession extension represented “an important development” for the company as it is now placed “in the same position as the other concessionaires when the Macau government considers inviting tenders for the next round of gaming concessions”.
SJM Holdings confirmed in a Friday press release that it had already signed with the local government the relevant paperwork for the extension of its concession extension, and with MGM China’s side for the related sub-concession.
Ambrose So Shu Fai, chief executive of SJM Holdings, said in a prepared statement, referring to Sociedade de Jogos de Macau SA, the locally-registered unit holding its Macau concession: “SJM SA welcomes this extension and the reasonable terms set by the Macau government. Synchronising the expiration dates of all concessions and sub-concessions is very much in the interest of Macau and its tourism industry.”
In connection with the licence extension, SJM Holdings and MGM China will each have to pay MOP200 million to the government by way of compensation.
Other conditions set by the government require the two gaming operators to join the city’s “Non-mandatory central provident fund system” and to establish what is termed a “Labour creditor’s rights protection fund” – as encouraged among the city’s employers under local legislation passed in 2015 – within three months from the date of the signing of the new contracts.
Under the labour creditor’s rights protection fund, SJM Holdings is required to provide a bank guarantee of not less than MOP3.5 billion to the Macau government “to warrant the fulfilment of an already existing commitment of labour liabilities after the expiry of the concession extension contract”. In the case of MGM China, the company is required to provide a bank guarantee of at least MOP820 million.
The agreement also states that the government may require from each of the companies an increase to the amount of that stated guarantee, depending on the number of eligible employees hired by them.
(Updated 5.05pm, March 15)
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”China has been strengthening the control over capital flow, and the impact of that has already been reflected [on Macau’s gaming revenue trend]. There should not be any bigger impact from the new… legislation [on the mainland] … on the gaming revenue trend here”
Wilfred Wong Ying Wai
President of Macau casino operator Sands China