Tables issue sparks contingency plan for Studio City
Studio City International Holdings Ltd, a joint venture in which Melco Crown Entertainment Ltd owns a 60 percent interest, said on Tuesday it is preparing a “contingency plan” ahead of any gaming table allocation decision by the Macau government for its Studio City casino resort (pictured).
The US$3.2-billion Studio City on Cotai is on track to open on October 27, Melco Crown announced on August 5. That date was reaffirmed in Tuesday’s statement by Studio City International Holdings.
“Because of the possibility that the table allocation for Studio City’s gaming area may be lower than anticipated, Studio City International Holdings Ltd has engaged Kirkland and Ellis LLP as its counsel and Moelis and Co LLC as its investment banker to assist it with contingency planning ahead of any table allocation decision for Studio City,” the Melco Crown majority-owned unit said in its Tuesday press release.
Lawrence Ho Yau Lung, co-chairman and chief executive of Melco Crown, said at a press conference on August 5 that he hoped Studio City could open with 400 gaming tables. Melco Crown has the option of shifting tables from its other Macau properties to make up the numbers for Studio City’s launch, but the Macau government operates a cap on the number of new-to-market tables it is prepared to authorise for each new project.
“We would hope to get 400. We think 400 is a realistic figure, but ultimately it’s not our call,” said Mr Ho, referring to his desired number of tables for Studio City’s launch. “We hope that the Macau government will reward us for the hard work we have put in over the years … the amazing elements we have introduced to Studio City.”
Deutsche Bank Securities Inc had mentioned in a note on July 31 the likelihood of Studio City being allocated 150 new-to-market tables by the Macau government.
In May, casino market rival Galaxy Entertainment Group Ltd was granted 150 new-to-market tables for its Galaxy Macau Phase 2. Speaking to reporters last week, Mr Ho admitted being “extremely concerned” about the table allocation that Galaxy Entertainment got.
Melco Crown said in its 2014 annual report filed with Nasdaq in April that it might technically fall into default on an approximately HKD10.86-billion (US$1.4-billion) Studio City project loan if it is unable to open the casino resort by October 2016 “with a minimum 400 gaming tables available for operation”.
“In the event that we are unable to meet these conditions, it may constitute an event of default under the Studio City Project Facility,” stated the firm.
On August 7, Melco Crown reported an 83-percent decline in net profit for the second quarter of 2015, to US$24.3 million.
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