September 1, 2009
LVS buys time and room to maneuver
Las Vegas Sands has won approval from lenders to amend its US$3.3 billion Macau credit facility, which will require the casino giant to pay a higher interest rate, but will give the company more flexibility to sell a minority interest in its Macau operations.
LVS is considering an initial public offering or sale of Macau assets to raise about $3.5 billion. It is estimated the company needs about $2 billion to finish five hotel projects in Macau that were halted in the face of the global economic downturn.
In Singapore, meanwhile, the company announced the resignations of the president and vice president of its massive resort under construction there.
Marina Bay Sands, as the project is known, said its president, Nigel Roberts and vice president, Tony Cousens, have left the company. No explanation was given, according to press reports.
The $5 billion Marina Bay Sands, located in Singapore’s bustling downtown harbor, was originally scheduled to open late this year but now is slated for an opening early next year because of delays related to labor and material.
Thomas Arasi, formerly chief executive of hotel operator Lodigian, was named the new president and chief executive. Ronen Nissenbaum will be the new executive vice president for operations. He was the regional vice president of operations in North America for Intercontinental Hotels Group.
MACAU GOVERNMENT IMPOSING ORDER ON JUNKET COMMISSIONS
The government of Macau is tightening its control over the VIP gaming market by imposing a ceiling on junket commission rates.
Under a newly revised administrative regulation the government’s secretary for Economy and Finance will be responsible for overseeing and determining the maximum commission rate and other remunerations local casinos pay to the operatives who steer them high rollers. The secretary is also authorized to define the way the payments are made.
Macau’s six licensed casino operators have generally agreed on a maximum rate of 1.25 percent, which was also accepted by the government in the interests of orderly competition, according to a report by China’s Xinhua news agency.
Macau’s casinos rely on the junket operators as agents to bring big-spending gamblers to the gaming tables. As a reward the casinos pay a percentage of bets placed by these VIP gamblers to the junket operators as commissions.
The commission rate rose to a high of 1.35 percent as competition heated up in recent years with the liberalization of the market. When Stanley Ho held the casino monopoly in the days of Portuguese rule he was paying commissions of just 0.8 percent
PENGHU ANNOUNCES MAJOR RESORT PLANS
Officials of Taiwan’s Penghu archipelago plan to build a massive resort casino costing upwards of US$910 million.
Depending on what local voters decide in an upcoming referendum, the Penghu County government is proposing its resort on 130 coastal hectares with hotels, duty-free shops, a convention center and a golf course, said Liu Mei-fan of the county’s tourism bureau, which would concession out the land.
The county’s project should take shape over four to five years, Liu said. It would compete with a privately operated, 11-hectare project proposed by Britain-based AMZ Holdings, which has broken ground on 80 villas and lined up institutional investors.
Taiwan hopes to stimulate the kind of growth seen in other places, most notably Macau, that have legalized or expanded gambling. Major operators from around Asia and the United States, including Harrah’s Entertainment, have visited Penghu, a chain of wind-hammered islands in the Taiwan Strait, to examine the investment potential, Liu said.
“Penghu citizens have had this idea for more than 20 years, and when we held a referendum before, support was strong,” Liu said. “There’s a problem here. In the winter, we hit a low tourism season, so merchants have it tough then.”
Taiwan’s parliament voted in January to legalize gambling on offshore islands, paving the way for as many as three casino resorts in Penghu. But before any casino goes forward, voters in Penghu, with a population of 90,000, must approve another referendum in support of the initiative.
HO DOING ‘VERY GOOD’ AFTER SUFFERING STROKE
Stanley Ho is in “very good’’ condition and “doing better,” his third wife, Chan Un Chan, told reporters at Hong Kong’s Adventist Hospital, where the 87-year-old Macau casino tycoon underwent surgery for a stroke.
The Hong Kong newspaper Apple Daily reported that Ho was having motor problems with half his body. There have been rumors that he is unconscious, but Chan denied this.
Ho underwent a second brain surgery to remove a blood clot, Apple Daily reported. He checked into the hospital because of a fall, the Chinese-language newspaper said.
Ho is chairman of SJM Holdings, the largest casino operator in Macau in terms of number of casinos. The “casino king,” as he is known locally, he had a government monopoly on gambling in Macau for 40 years before the peninsula was returned to Chinese rule in 1999.
VICTORIANS SPENT $2.7B. ON POKIES IN LAST YEAR
Victorians gambled a record A$2.7 billion on poker machines last year, and the state government has been accused of not doing enough to combat problem gambling.
Victorian Commission for Gambling Regulation figures show spending on pokies in hotels and clubs rose 1.7 percent to $649 per adult in the 2008/09 financial year for a total increase of $96 million on the previous year.
The government expects to reap $1.6 billion in taxes from all gambling for the financial year.
But the VCGR said spending was down almost 21 percent since 2000, taking into account population and inflation growth. The number of pokies venues also dropped to 515, the lowest in a decade, while the number of licensed poker machines, 26,772, also hit a 10-year low.
But that didn’t stop the political opposition from claiming that Premier John Brumby is addicted to gambling revenue. The federal government’s $900 stimulus package, distributed in December and April, also was in their crosshairs. Opposition spokesman for gaming Michael O’Brien said that during the “cash splash” months of the stimulus package, pokie losses increased by $55.3 million, or 58 percent, with losses overall up $100 million.
“In the midst of an economic downturn, John Brumby and [Prime Minister] Kevin Rudd have made sure that pokie losses continue to soar,” O’Brien said.
EARNINGS STAY STRONG FOR GALAXY’S CASINOS
Publicly traded Galaxy Entertainment Group reported HK$496 million in EBITDA for the combined first and second quarters of 2009 on its Macau casinos operations, a robust 86 percent increase over the same period in 2008.
Throughout the second quarter Galaxy said it maintained its market share at 12 percent despite significant new gaming supply entering the market and 50 percent of StarWorld’s mass-market gaming floor being out of commission for the second half of the reporting period due to remodeling.
Francis Lui, deputy chairman, said, “We are pleased to report that Galaxy continues to outperform the market, with StarWorld generating four consecutive quarters of EBITDA growth and maintaining market share against significant new capacity and competition. We also took the opportunity to further strengthen our balance sheet through additional debt buybacks.”
During the period Galaxy repurchased HK$210 million of debt at approximately 50 cents on the dollar. Galaxy’s cash on hand was HK$5.4 billion.
The company also said it was continuing with casino construction at Cotai and would schedule an opening in line with economic conditions.
Galaxy owns and operates its flagship StarWorld Hotel and Casino and four CityClub casinos in Macau.
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