Gambling operator Melco Crown Entertainment may strike a $1-billion deal with hedge funds in an attempt to improve the operations and overall financial performance of its $3.2-billion Studio City integrated resort, which is scheduled to open doors on October 27.
Local media reported that the likely reason for the deal is the possible allocation of fewer gaming tables at the resort’s casino floor that it had initially been expected.
Melco Crown Entertainment is a joint venture between Hong Kong-headquartered gaming company Melco International Development and Australian operator Crown Resorts. In fact, James Packer’s Crown owns a 34% stake in Melco Crown Entertainment. Studio City is waiting the Macau government’s decision regarding the number of gaming tables that would be featured at the multi-billion-dollar property.
It had initially been planned that the casino complex would be allocated 400 tables. However, Macau officials later on said that it may eventually be allowed to operate no more than 150. The final decision is to be announced sometime in October, right before the official launch of Studio City.
Gaming revenue at the Chinese administrative region has been dropping for more than a year now and experts have attributed this to the anti-graft campaign carried out by China President Xi Jinping. It resulted in fewer high rollers from Mainland China coming to Macau, which is the only territory within the country’s borders where casino gambling is allowed.
Melco Crown owns a 60% stake in Studio City International Holdings, the company that develops and operates Studio City. Hedge funds Oaktree Capital Management and Silver Point Capital hold the balance through the so-called New Cotai group.
Under a provision in the $1.4-billion loan that covers Studio City, the venue needs to feature at least 400 gaming tables. According to gambling experts, if Melco Crown decides to move tables from the other Macau-based properties it operates to its newest one, it will have to reduce its share of the proceeds generated. However, if it owned the integrated resort outright, it would be able to transfer tables between its casinos more easily.
According to analysts from Bernstein research, a deal between the gambling operator and the hedge funds is likely to take place anytime soon. In addition, it was estimated that New Cotai’s interest in the $3.4-billion hotel and casino resort amounts to $1 billion.
Similarly to Melco Crown, rival gambling operator Galaxy Entertainment Group, which launched Phase 2 of its integrated resort in May, was denied the chance to operate 400 gaming tables and was granted the permission for 150.
Experts said that Studio City may eventually be allowed to operate more than 150 gaming tables as it features more non-gambling attractions. Following the constantly decreasing casino revenue, Macau officials said earlier this year that the city should become less reliant on its casino industry. Thus, operators were encouraged to introduce other types of exciting features that would attract the attention of tourists from around the world.
As mentioned above, the government of Macau is to announce how many gaming tables Studio City would run by the end of October, when the property is to hold its opening ceremony.
