Macau casinos secure $1.5 billion in loans from Wynn and LVS

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Two Macau casinos have received large loans from their US parent companies, helping them weather the latest COVID shutdown. However, it may be American players and shareholders who ultimately pay the price.

Macau casinos have closed again to fight another COVID outbreak. Meanwhile, two casinos have secured large loans from their US-based parent companies. (Image: Chris McGrath/Getty)

Last month, Wynn Resorts provided a $500 million revolving loan to Wynn Macau. Meanwhile, Las Vegas Sands loaned $1 billion to Sands China. America’s casino parent companies have been working hard to keep the region’s gaming hub afloat, especially as their Macau gaming license renewal hangs in the balance.

Macau casino loans could get expensive for Vegas gamblers

Las Vegas is on the rebound. In May, Vegas airport experienced its third busiest month in its history. Nevada casinos booked a gambling payout of $1.3 billion, the fourth highest ever. And average daily room rates have topped $175. This is good news for casinos, but bad news for bargain hunters.

Usually, triple-digit Vegas heat brings with it plenty of rewards and incentives. This year, however, summer room rates, parking fees, and resort fees are near their peak. Granted, casinos have some losses to make up for, given the COVID 2020 shutdowns and subsequent restrictions. But the gouging seems overdone this year.

This may be because Vegas casinos don’t just make up for their past losses. Many of them make up for Macao’s current losses. Macau casinos closed again last Monday due to an outbreak of COVID. Analysts now predict that Macau’s gross gaming revenue (GGR) in 2022 could be just 20% of its 2019 levels.

MGM Resorts, Wynn and Las Vegas Sands all have properties in Macau. So far, two of the three have issued large loans to bail out their Macau casinos. The timing could have been ugly for Apollo Global Management, the new owners of the Venetian and Sands Expo Center. But since he only bought the rights to exploit the US assets, he dodged a bullet this time.

The breaking of Apollo’s curse

In many ways, Apollo Global Management is a successful private equity firm. But Apollo’s past association with a Las Vegas-based casino wasn’t pretty.

Apollo was responsible for the biggest casino failure in history. In 2006, Apollo and TPG Capital purchased Harrah’s Entertainment (later renamed Caesars). Unfortunately, the timing couldn’t have been worse.

When the deal was finally struck, the United States was in the depths of the 2007-08 financial crisis. Apollo closed some casinos to cut costs, but that wasn’t enough to cover its huge debt. In 2015, the casino chain filed for Chapter 11 bankruptcy.

The bankruptcy shook the industry. In fact, the Nevada Gaming Commission was somewhat reluctant to approve Apollo’s LVS license. During his hearing, the commissioners pressed Apollo to explain why the LVS purchase would not end up like Caesars.

Apollo eventually got approval from the Nevada Gaming Commission. And in a way, maybe he will finally find some good casino karma. After all, the $2.25 billion he paid for LVS’ US properties could help bail out the industry.

Ironically, Caesars – another major player without Macau ownership – may fare better in 2022. Apollo sold its remaining stake in Caesars in 2019.

Correction: The original article implied that Apollo owns LVS. It has since been corrected to clarify that Apollo only owns the rights to exploit former LVS US properties.

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