MGM China secured a $750 million loan from its parent company amid pandemic-related struggles. [Image: Shutterstock.com]
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 subordinated revolving loan facility. The loan agreement between MGM Resorts International and its subsidiary MGM China was signed on Thursday.
interest rate at 4% per annum
The loan facility will be active for two years, with an interest rate 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 would help it maintain its financial position and be able to fund future needs, such as working capital.
Macau’s casino industry has been struggling since the onset of the COVID-19 pandemic. Travel restrictions have been in place most of the time, resulting in a significant drop in visitor numbers. During the third quarter of 2022, gross gaming revenue was only 8% of pre-pandemic levels.
Most casino operators in the special administrative region suffered significant losses. In its last quarter to the end of September, MGM China’s earnings before interest, tax, depreciation and amortization (EBITDA) reached $68.2 million. Its occupancy rate was only 21% over the three-month period and its total market share was 13%.
Another cause for concern for casino operators in Macau is that their licenses are currently being renewed. Existing licenses will expire at the end of the year, with each of the six licensees having to prove they are worthy of receiving a new ten-year licence.
seven contenders for the six licenses
The application process has already started, viewers expect successful applicants to be notified that they have been granted a license before the end of 2022. There are seven applicants for the six licenses after Genting Group also threw his hat in the ring.
China has also imposed a crackdown on casino partnerships with junket operators who bring in high roller business from overseas. Stricter laws have recently been put in place on this subject. The rules also impose more compliance obligations on operators.