MGM China has secured a $750 million loan from its parent company amid ongoing struggles related to the pandemic. [Image: Shutterstock.com]
A little help
MGM China has received a $750 million loan from its parent company as the Macau casino market continues to struggle. According to a Hong Kong Stock Exchange filing, MGM China will obtain the funds through a secondary revolving loan facility. The loan agreement between MGM Resorts International and its subsidiary MGM China was signed on Thursday.
An interest rate of 4% per annum
The loan facility will be valid for a period of two years, with an interest rate on the loan of 4% per annum.
In the filing, MGM China said the loan agreement shows how confident both parties are in the long-term growth potential of the Macau market. The company said the additional financing capabilities will help it maintain its financial position and be able to fund future requirements, such as working capital.
The casino sector in Macau has been suffering since the beginning of the COVID-19 pandemic. Travel restrictions were in place most of the time, which significantly reduced the number of visitors. During the third quarter of 2022, total gaming revenue was only 8% of pre-pandemic levels.
Most of the casino operators in the Special Administrative Region suffer significant losses. In the most recent reported quarter through the end of September, MGM China’s EBITDA was $68.2 million. Its occupancy rate was only 21% in the three-month period, and its overall market share was 13%.
Another source of concern for casino operators in Macau is that their licenses are currently under renewal. Existing licenses will expire at the end of the year, with each of the six franchisees having to prove they are entitled to a new ten-year license.
Seven competitors for six licenses
The application process has already started, and spectators expect successful candidates to be informed that they have been granted a license before the end of 2022. There are seven contenders for the six licenses after Genting Group has thrown its hat into the ring.
China has also cracked down on casino partnerships with waste operators who bring in high-speed business from abroad. More stringent laws have recently been passed on this matter. The rules also place more compliance obligations on operators.