Studio City was allocated 250 new gaming tables when it opened last month, well short of the 400 the company had expected. MCE had also promised creditors holding $1.4b of Studio City’s debt that it would receive “a minimum 400” new tables, meaning the property was technically in default before it even opened.
On Wednesday, MCE announced it had reached agreement with bankers to amend financial covenants to reflect the reduced table allocation. The agreement reportedly contains a covenant holiday that alleviate Studio City’s need to meet certain established financial ratios in 2016, while also allowing MCE to effectively double the property’s total leverage to 9x its Q1 2017 earnings.
Union Gaming analysts issued a note on Wednesday saying 250 tables appeared to be the benchmark for future openings in Macau. There are four remaining mega-resorts set to open on Cotai, including Wynn Macau’s Wynn Palace, MGM China’s MGM Cotai and Sands China’s Parisian Macao, all of which are scheduled to open in 2016. SJM Holdings’ Lisboa Palace will follow near the end of 2017.
Macau authorities have vowed to uphold their commitment to 3% compound annual growth in new table allocation until 2022, when the last of the Macau casino concessions is up for renewal. Under that formula, Union Gaming estimates there are 1,097 tables left to be allocated, and with Studio City and Galaxy Entertainment Group’s Phase 2 of Galaxy Macau each receiving 250 tables this year, the government’s mindset appears fixed.
Assuming that forecast is correct, the government could have around 100 tables left over once the last major property has opened. These could be used as a reward for operators who devote more resources to non-gaming amenities, or perhaps Louis XIII will get to open a casino after all.