The risk of potential claims by junket agents on Macau’s casino operators does not present any major concerns for Sands China Ltd, which does not face any material liability according to the company’s President, Dr Wilfred Wong.
The issue of concessionaires being held accountable for outstanding junket debts reared its head last November when the Court of Final Appeal confirmed that Wynn Macau Ltd and junket promoter Dore Entertainment Co were jointly liable for repayment of a HK$6 million (US$770,000) debt owed to a VIP customer. That case was related to the theft of up to HK$700 million (US$90 million) from Dore’s VIP room at Wynn Macau in 2015.
More recently, MGM China warned that it might also be liable for up to HK$202.7 million (US$25.9 million) in cash deposits claimed to have been made by individuals with junkets operating out of MGM’s properties.
Those cases prompted investment bank Credit Suisse to issue a note late last week stating that the closure of many of those leading junkets since the arrest of Suncity Group CEO Alvin Chau in November could leave Macau’s casino concessionaires exposed to liabilities totaling up to HK$100 billion, describing it as “a material tail risk investors should consider.”
But speaking to analysts during Las Vegas Sands’ 1Q22 earnings call on Thursday (Asia time), Dr Wong said Sands China did not expect to face any significant liabilities from the collapse of the junket industry.
“The cessation of operations of all the fixed room junket promoters happened fairly recently in December of last year and as a result there are some new court cases being raised by various stakeholders in that system,” he said. “Currently there is nothing material to report from Sands China’s perspective. There are a few cases going on but none of them are material and we will report back if there are any changes.”
The Credit Suisse report also named Sands China as the company with least junket exposure compared with Macau’s five other casino concessionaires.
On the same earnings call, LVS President and COO Patrick Dumont addressed liquidity issues in the wake of recent analyst reports suggesting Sands China had only around nine months’ worth of cash on hand while the COVID-19 pandemic drags on.
“We understand there are a couple of articles out about concerns around liquidity, but we have a very strong balance sheet,” Dumont said.
“Yes, we’ve received some stress over the past few years under the pandemic’s tough operating conditions – I think we all have – but the good news is that our company as a group has a lot of liquidity. We have a lot of different options.
“The good news is we were an investment grade company during the pandemic, which says a lot about the market’s view of our ability to raise additional capital.
“Where we are today is: we’ll look to see how the operations continue coming out of the pandemic, look at our liquidity and make decisions based on our available options. I don’t think we are stuck in one particular view. We have cash at the parent, we have cash around the system, we have an investment grade credit rating, we have access to credit markets and we have positioned ourselves well to benefit from the recovery on the other side. We have a lot of flexibility and we will use it as needed.”
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