Macau casino ops commit US$1.1bln to a govt fund as concession-related investment obligations

Macau’s six casino operators have committed a combined MOP9 billion (US$1.11 billion) to a local government-backed investment fund created to support the city’s economic diversification. The contributions from the casino firms will count towards their concession-related investment obligations, according to a Friday announcement. The commitments form part of a Macau government guidance fund initiative with an initial size of MOP20 billion, said the local authorities. The other MOP11 billion will come from accumulated earnings on Macau’s financial reserves. Documents establishing the fund were signed on Friday at Government Headquarters, at a ceremony attended by Macau’s Chief Executive, Sam Hou Fai. The government said the ceremony marked the official start of the fund’s operations. The casino concessionaires are participating as limited partners in what is known as the Macau SAR Government Guidance Fund No. 2 Ltd Partnership Fund, according to separate Friday filings by the gaming companies made to the Hong Kong Stock Exchange. Sands China Ltd disclosed a commitment of approximately MOP2.30 billion, through its concession-holding subsidiary Venetian Macau Ltd. The company said the amount would be credited towards its non-gaming investment commitments under its concession, which runs until December 2032. The fund commitment “replaces other projects and spend anticipated within the non-gaming investment commitments under the concession,” Sands China stated. Galaxy Entertainment Group Ltd said its subsidiary Galaxy Casino Ltd would commit approximately MOP2.27 billion. The investment will count towards its non-gaming concession commitments, with capital contributions expected “to be made in stages”. MGM China Holdings Ltd disclosed a MOP1.24-billion commitment through MGM Grand Paradise Ltd. It said participation would count towards fulfilment of its concession investment arrangements, originally comprising MOP16.7 billion in gaming and non-gaming projects. SJM Holdings Ltd said SJM Resorts Ltd had committed MOP992.7 million. Contributions would fulfil an equivalent amount of investment obligations under its concession, meaning the transaction was not expected “to cause material incremental financial obligation to the group”. Melco International Development Ltd disclosed a MOP828-million commitment through Melco Resorts (Macau) Ltd, representing 9.2 percent of the concessionaires’ aggregate commitments. Its contributions will similarly count towards its non-gaming investment obligations. Fostering economic diversification Wynn Macau Ltd said its concession-holding subsidiary, Wynn Resorts (Macau) Ltd, had committed up to MOP1.365 billion to the fund. The company said the contributions would constitute non-gaming investment and count towards its committed investment obligations under its gaming concession contract. Wynn Macau Ltd also said capital contributions would be drawn down on at least 30 days’ written notice, although that period could be shortened to no fewer than seven business days in emergencies or special circumstances. The fund has an initial term of 15 years, with the first five years designated as the investment period, according to MGM China’s filing. The vehicle will be managed by Macau Investment and Management Co Ltd, a company backed by the city’s government. Aside from the initial term of 15 years, the fund is subject to up to two extensions, each of one year in duration. That would take the life of the fund beyond the operators’ current gaming concessions, which expire in December 2032. Melco’s filing said the fund’s term was separate from the concession period. The casino operators will not participate in its day-to-day management or operations. The vehicle will invest in commercially-sustainable projects, including emerging industries, industrial upgrading, and the commercialisation of research and technology start-ups. Its remit also covers projects supporting cooperation between Macau, Hengqin and the wider Guangdong-Hong Kong-Macau Greater Bay Area. The government said the broader initiative would adopt a three-tier structure comprising a guidance fund, parent funds and sub-funds. Professional managers selected through an open process will manage the parent funds and sub-funds. Macau’s Secretary for Economy and Finance, Ng Wai Han, said industrial upgrading and technological innovation required substantial, long-term financing. She described the fund’s establishment as the result of negotiations between the government and the six operators.