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

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 parent casino companies have worked hard to keep the region’s gaming center afloat, especially since their Renewal of gaming licenses in Macau are 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 have reserved a $1.3 billion gambling payout – the fourth highest of all time. 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 Macau’s 2022 Gross Gaming Revenue (GGR) Could Be Fair 20% of their 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 is particularly bad for Apollo Global Management, the new owners of Las Vegas Sands. But, again, they’ve been down this road before.

Apollo’s Curse: Deja Vu Again

Obviously, Apollo Global Management cannot be blamed for the pandemic. In many ways, it’s a successful private equity firm. But when it comes to buying Las Vegas-based casino companies, Apollo is a mush.

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 purchase of LVS. During his hearing, the the stewards pressed Apollo to explain why buying LVS wouldn’t end up like Caesar.

Apollo eventually got approval from the Nevada Gaming Commission. But, in retrospect, that may have been his easiest hurdle to clear. A billion-dollar loan, a fast approaching license renewal deadline in Macau and a region still grappling with COVID restrictions will be strong headwinds for Apollo’s first year at the helm.

Ironically, Caesars – one of the only major players without ownership in Macau – may fare better in 2022. Apollo sold its remaining stake in Caesars in 2019.

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