MGM China Holdings Limited to benefit from contract Expansion

The recent decision by the government of Macau to extend the casino license of MGM China Holdings Limited by a further two years will allow the operator to improve its ‘capacity to finance the business’ and prepare ‘for future capital investments.’

Two-year reprieve:

According to a report from GGRAsia, this is the opinion of the Hong Kong-listed firm’s Chief Executive Officer, Grant Bowie, after its right to operate casinos in the former Portuguese enclave was extended until June 26, 2022.

Debt distress:

Majority-owned by American casino giant, MGM Resorts International, MGM China Holdings Limited is responsible for the MGM Macau venue and opened its $3.4 billion MGM Cotai property in mid-February of last year. Both properties offer gaming services under the terms of a sub-concession held by fellow locally-licensed operator SJM Holdings Limited but reportedly finished 2018 with aggregated debts of about $2.4 billion.

Bowie commented…

“The extension provides other opportunities otherwise, if the concession had terminated in 2020, most of the people that were carrying our debt would want their money back. This decision strengthens our capacity to finance the business. We have a whole series of different scenarios we are now working through.”

Tower target:

MGM Resorts International finished the year by inking a series of agreements that will allow it to borrow more money in order to refinance debts, fund already agreed transactions and cover general corporate purposes. The Las Vegas-headquartered behemoth is moreover pursuing a casino license in Japan and is thought to be hoping to add another hotel tower to the MGM Cotai venue.

The CEO added…

“The tower is certainly one of the things we built in [to our planning] but we actually have a lot of other opportunities that we want to create for the business as well. The issue of capacity and financial structuring are kind of separate conversations.”

‘Positive’ prospect:

GGRAsia cited Bowie as describing the extension as ‘positive’ due to the fact that the right to operate casinos in Macau is seen as his firm’s ‘principal asset’. The executive also purportedly divulged that his company was investigating the possibility of becoming a concessionaire in its own right after 2022.

He continued…

“So, [the extension] is seen to be positive and it does give us the opportunity to look at alternate financing strategies moving forward, particularly preparing us for future capital investments.”

Hazy interval:

The extension means that MGM China’s casino concession in Macau is now due to expire at the same time as the city’s other licensed operators, which encompass SJM Holdings Limited, Galaxy Entertainment Group Limited and Melco Resorts and Entertainment Limited as well as the Sands China Limited and Wynn Macau Limited subordinates of Las Vegas Sands Corporation and Wynn Resorts Limited respectively. It explained that the agreement has moreover left the government free to begin considering how it would like to approach who is permitted to offer gambling after the current raft of licenses terminate in 2022.

Bowie concluded…

“I don’t have any comment on the timing of the tender process. That is totally and exclusively with the government. I think the government has a lot of work in terms of preparing the framework, the documentation and everything else in terms of how that process is going to work.”