Wynn Macau Comfortable Saying Permits to Be Renewed or Extended

Posted on: September 6, 2021, 03:12h. 

Last updated on: September 6, 2021, 04:08h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Wynn Macau believes its licenses to operate its namesake integrated resort and Wynn Palace in the world’s largest casino center will be extended or renewed past June 26, 2022. That’s the date when gaming permits for all six of the concessionaires in the special administrative region (SAR) expire.

Wynn Macau
Wynn Palace in Macau. The operator believes its gaming permits there will be renewed. (Image: CNBC)

The gaming company made the comments in a corporate filing released last week. Wynn Macau is controlled by Las Vegas-based Wynn Resorts (NASDAQ:WYNN).

The company is monitoring developments with respect to the Macau government’s concession renewal or extension process, and at this time believes that its concession will be renewed or extended beyond June 26, 2022,” according to the interim report.

Las Vegas Sands, MGM Resorts, and Wynn Resorts are the US-based companies operating in the world’s largest gaming center, combining to run nine integrated resorts there. Galaxy Entertainment, Melco Resorts & Entertainment, and SJM Holdings are the SAR’s other concessionaires.

State of Macau License Renewal

Entering this year, market observers expected the issue of gaming permit renewal in Macau would gain steam following 2020 setbacks caused by the coronavirus pandemic.

The process is stalling because Macau authorities want to factor into the license renewal the SAR’s recovery from the coronavirus pandemic — something that’s been slow-moving due to still-lingering travel restrictions, which are causing tepid monthly gross gaming revenue (GGR) figures.

Local law gives authorities some wiggle room in that they can renew current accords with gaming companies and revisit the license renewal issue in 2027.

Adding to the delays is that Macau must work through a new tender process. Local law must be altered prior to that effort commencing, and that’s how the five-year extension could take place. The maximum extension allowed is five years following the 20-year period in which the original licenses are valid.

While the license renewal effort is sluggish, there’s some silver lining. Analysts expect permits for the three US-based Macau operators will be renewed despite lingering geopolitical tensions between the US and China.

Why It Matters to Wynn Macau

Wynn counts on Macau for two-thirds or more of EBITDA and revenue in typical quarters in standard operating climates, so it’s vital that the operator procures a new permit to continue operating in the Chinese territory. Wynn Macau confirms as much in the interim report.

“The failure to extend or renew the Concession Agreement or obtain a new concession, and the resulting ability of the WML Senior Notes holders to exercise the Special Put Option, would have a material adverse effect on the Company’s business, financial condition, results of operations, and cash flows,” said the operator.

With the calendar working against Macau authorities, market observers are betting that the efficient option will prevail. That would be to renew concessionaires’ permits for a year or two, and deal with more extensive reupping of the licenses at a later date.