Macau's six concessionaires see licenses extended through December;
The Government of the Macao Special Administrative Region (MSAR) has approved applications by the six existing operators in the city regarding the extension of their license contracts for gaming to December 31, 2022, inclusive. Ahead of the approval, JP Morgan said it expects the new public tender for Macau's gaming licenses to start in late July or August.
The concession contract extensions were signed Friday at the Government Headquarters by the Chief Executive, Ho Iat Seng, with representatives of respectively SJM Resorts, S.A.; Wynn Resorts (Macau), S.A.; and Galaxy Casino, S.A.
Separately, representatives from the Gaming Inspection and Coordination Bureau witnessed the signing of contract extensions by the aforementioned three companies with their respective sub-concessionaires: MGM Grand Paradise, S.A.; Melco Resorts (Macau), S.A.; and Venetian Macau, S.A.
Taking into account that "the process of the new public tender (…) will not be concluded before the expiry of the concession period, the exceptional extension of the concession period (…) will not only ensure the smooth running of the public tender process but will also contribute to the maintenance of social stability, namely the stability of the labor market,” read a dispatch by the Chief Executive published Friday in the Official Gazette. The dispatch, signed by Ho Iat Seng on June 20, comes into effect today (Friday, June 24), the date of publication.
In return for the extension of the concession period for the operation of gaming in casinos, the concessionaires/sub-concessionaires will pay the MSAR an additional amount of 47 million patacas ($5.8 million), according to a statement issued by the Government Information Bureau. Additionally, "the gaming concessionaires/sub-concessionaires will need to set up a guarantee for the fulfillment of labor commitments, with a view to providing guarantees to their workers within three months from the signing of the extension of the contracts."
The Government adds that through the new amendment to the contracts, the authority applies the reversion of casinos and all their equipment and utensils to the Region after the termination of the concession, in accordance with Law no. 16/2001 (Macau Gaming Law). This is "to ensure that future concessionaires for the exploitation of games of chance in casinos can continue to use the existing gaming facilities, guaranteeing a perfect articulation between the old and future concessions."
Shortly after Macau lawmakers approved the new gaming law Tuesday allowing six licenses for 10-year periods, brokerage JP Morgan said in a note that they expect the new public tender for Macau's gaming licenses to commence in late July or August, basing its expectations on the timeline of a 2001 tender. Furthermore, they stated that the result of the tender process may be announced by November.
In the note, analysts DS Kim and Livy Lyu remarked: "We recall, for the original concession 20 years ago, that public bidding kicked off around 40 days after the [original] law was passed and lasted for about three months."
"Based on this, we expect the bidding to kick off in August (or late July), the result of which could be announced by early November," the analysts said, as reported by Macau Daily Times.
Amendments to the Macau SAR’s Gaming Law No. 16/2001 will give the Chief Executive the power to terminate a gaming license without judicial procedures if a casino operator infringes upon national security or fails to meet the duties of a concessionaire, such as paying taxes on time, with the holder having to return its gaming area/capacity to the government without compensation.
Under the new legislation, the number of new licenses is limited to six, and the new permits will be given out for up to 10 years, down from the current 20 years.
The approval of the new law also comes amid a fresh outbreak of Covid-19 that is bringing the city to a standstill, triggering casino stocks to fall by as much as 3.38% earlier this week. For eight months, Macau has recorded zero Covid-19 cases in the local community.
Over the past two months, the battered industry has suffered a slump in revenue. In April it recorded its worst losses in 18 months, with gross gaming revenue (GGR) reaching only MOP2.68 billion ($331,5 million) as Macau endured stricter border restrictions whenever fresh outbreaks arose in neighboring regions.
Subsequently, in May, GGR dropped to MOP3.34 billion ($413,2 million) the second worse figure since travel resumed for visitors from mainland China in September 2020. According to JPMorgan Chase & Co analysts, including DS Kim, Macau’s GGR may hit “near-zero levels” for at least a few weeks until the situation is under control.