Macau Could Employ Stopgap Measures for License Renewal Amid Time Crunch

Posted on: December 11, 2020, 12:52h. 

Last updated on: December 11, 2020, 02:18h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Because of the coronavirus pandemic, Macau faces a crimped timeline for renewing gaming licenses. That means it could resort to various temporary solutions before delving into more substantive discussions with the six concessionaires.

Macau Renewal
Wynn Macau. Analysts see a tight timeline for license renewal for all operators in Macau. (Image: Chris McGrath/Getty Images)

Heading into 2020, it was widely expected that this would be the year lawmakers and gaming companies would get down to business regarding permits that expire in June 2022. Then, the pandemic struck, leading to a 15-day closure of all casinos in the special administrative region (SAR) in February, while prompting delays in the renewal procedures.

With about 18 months until expiration and with little progress made this year, Macau policymakers may have no choice but to turn to quick fixes. These perhaps include public tenders or extending operating rights under policies, according to some analysts.

With Macau officials focused on the pandemic and economic recovery, odds are increasing that current gaming licenses are extended beyond 2022,” note Macquarie analysts.

Las Vegas Sands, MGM Resorts, and Wynn Resorts are the three US-based firms operating in the SAR. The Asian companies with integrated resorts there are Melco Resorts and Galaxy Entertainment, headquartered in Hong Kong, and Macau-based SJM Holdings.

Proposals Must Include Post-Covid Plans

Earlier this year, Macau Secretary for Economy and Finance Lei Wai Nong spoke on the renewals. He said there would be no delays in terms of the government evaluating current gaming policies and formulating updates for an industry that’s rapidly changed over the past two decades.

The late Stanley Ho’s SJM Holdings held a four-decade gaming monopoly in Macau until 1999. Three years later, the other five aforementioned concessionaires were awarded licenses and gross gaming revenue (GGR) there more than doubled between 2009 and 2019.

While gaming policies and related updates aren’t being pushed back, the pandemic is throwing a wrench in the overall process. That’s because authorities now want to see operators’ plans for post-coronavirus recovery and gauge the veracity of that rebound when the virus is ultimately vanquished.

It’s possible “licenses are renewed at favorable terms, including no change in tax rates, manageable concession payments, and reasonable non-gaming capital expenditure mandates,” according to Macquarie.

Macau Could Renew Permits

If Macau policymakers opt to renew gaming permits under the above scenario, it’s probable the outcome would be a 10-year licensing period, not 20 years.

Another option, particularly if it appears likely the process will extend beyond 2022, is simply for the SAR to re-up the permits under current terms for two or three years. Macau law allows for a five-year extension of that nature after an original license expires.

Letting the process drag out potentially works in favor of the SAR government because it buys time for post-pandemic recovery to materialize.

“Renewing licenses after a full GGR [gross gaming revenue] recovery would offer policymakers more bargaining power (specifically over non-gaming capital expenditure),” according to Macquarie.

Las Vegas Sands and Galaxy Entertainment are the two largest Macau operators by market share.