Report: Macau casino junkets sitting on $8b in bad debts

macau-casino-junket-bad-debtMacau gaming regulators are conducting audits of licensed casino junket operators to determine the value of bad debts on their books.

In a report this week, public broadcaster TDM quoted Gaming Inspection and Coordination Bureau (DICJ) chief Paulo Martins Chan saying his office had tasked auditors with going over the accounts of licensed junkets to get a sense of the scale of their unrecoverable loans to high-rolling gamblers.

Late last year, the DICJ imposed new rules requiring junkets to submit monthly financial data in a bid to impose stricter accountability of the industry. The move was prompted by a wave of scandals, including internal thefts that left junket investors high and dry and led to the closure of many junket-controlled VIP rooms.

Chan told TDM that the DICJ was in uncharted territory as “we have never had this kind of information before.” Chan said he hopes to get a sense of just how bad the bad debt situation is by the end of 2016.

In December, the head of Macau’s Association of Gaming & Entertainment Promoters estimated that junkets were collecting only between 20% and 30% of their gambling loans. Many junkets were said to have been reduced to selling bad VIP debt at steep discounts to speculators.

Last week, a Daiwa Securities report claimed that junkets were “struggling just to break even” due to fewer mainland VIPs making the trip to Macau and rising bad debts, which the brokerage estimated amounted to at least HKD 30b (US $3.9b). The brokerage clarified that this total was a “very conservative estimate” and the real outstanding sum could be closer to HKD 60b.

Daiwa also suggested that Macau casino operators could end up sharing some of the junkets’ pain. Melco Crown Entertainment and Wynn Macau were fingered as “the most exposed of the operators to: 1) the riskier portion of the junket business, and 2) to premium-direct business.”