Wynn Macau Ltd. has received a $500 million revolving loan facility from its U.S.-based parent company, Wynn Resorts. Morgan Stanley analysts speculate that the Macau gaming giant and its peers in the city are having trouble raising money at favorable rates on the open market.
The loan will be used as working capital during the ongoing downturn caused by Covid-19 and China’s “zero-Covid” policy, which closes borders and restricts travel whenever a cluster of viral cases is identified. According to Inside Asian Gaming, Macau’s Big 6 casino concessionaires are said to be losing a combined $800 million per quarter.
In a June 8 note, Morgan Stanley’s Praveen Choudhary, Gareth Leung and Thomas Allen said the loan signals “worsening liquidity of the Macau gaming segment” and “could imply operators having difficulties to borrow from banks. We expect Sands China and SJM could announce similar arrangements soon, unless SJM could complete refinancing soon.”
Last Wednesday, SJM Executive Director Daisy Ho announced that SJM’s refinancing of US$2.4 billion in syndicated loans has been approved by the Macau government and by the banks involved.
The Morgan Stanley analysts also said that second-quarter gross gaming revenues (GGR) in Macau could tumble even farther than the first quarter. “We expect 2Q Macau GGR at US$1.1 billion (-49 percent quarter-on-quarter and just 12 percent of 2Q19), the third-worst quarter since 2020,” they wrote.
“We estimate 2Q22 [corporate EBITDA] for Macau at [a loss of US$600 million to US$700 million] versus [a loss of US$9 million] in 1Q22. 2Q FCFE (after development capex) could be negative US$1.6 billion to US$1.7 billion for the industry versus a US$1 billion loss in 1Q22.”
Wynn Macau is expected to post an EBITDA loss of US$100 million in the June quarter, they added.
The good news is that the loan facility from Wynn Resorts “highlights … confidence in the long-term growth potential of Macau and the availability of the facility further bolsters the company’s already strong financial position.”
Morgan Stanley projects Wynn Macau will burn cash at a rate of $2 million per day for the second quarter—more than 80 percent above its projected first-quarter daily burn rate figure, amounting to US$1.1 million.
