GGRAsia – Tight timing favours Macau permit status quo: Macquarie

Tight timing favours Macau permit status quo: Macquarie

Dec 10, 2020 Newsdesk Latest News, Macau, Top of the deck

The disruptive effect of the Covid-19 pandemic and the limited time left before the June 2022 expiry of Macau’s current six gaming licences, suggests either a public tender will reinstall the current rights holders, or the present licensees will get their current rights extended by a few years for a fresh assessment later, says a Wednesday note from Macquarie Capital Ltd.

“With Macau officials focused on the pandemic and economic recovery, odds are increasing that current gaming licences are extended beyond 2022,” wrote analysts Edward Engel, Chad Benyon, Jordan Bender and Aaron Lee.

Macquarie added: “Policymakers are managing a tight timeline, where Macau’s Chief Executive has committed to passing the revised gaming law in [by] fourth-quarter 2021. This would leave just circa six months for licence retendering, offering little room for error.”

The institution suggested either one of two scenarios might occur in the next 18 months.

In the first, “licences are renewed at favourable terms, including no change in tax rates, manageable concession payments and reasonable non-gaming capital expenditure mandates”.

But the institution thought that in that situation, 10-year rather than 20-year licences would be more likely, due to “deteriorating United States-China relations”.

Three of Macau’s current six licensees have U.S.-based parent companies: MGM China Holdings Ltd, Sands China Ltd, and Wynn Macau Ltd.

Under the second scenario, current licences might be “extended by two to three years,” said Macquarie.

Macau gaming law states that the licences of the existing holders can be extended for a maximum of up to five years from the original 20-year term. But once a gaming concession contract expires, any new concession would have to be granted via an international public tender.

The latter scenario was suggested recently by two former advisors to post-handover administrations in Macau.

“Renewing licences after a full GGR [gross gaming revenue] recovery would offer policymakers more bargaining power (specifically over non-gaming capital expenditure),” suggested the Macaquarie analysts in Wednesday’s note.

Several lawyers with expertise in Macau gaming legislation have suggested to GGRAsia that it would be hard to complete a public retender process prior to June 2022, in the light of a legislative timetable announced by the government in November.