Gaming | Think tanks warn of ‘growing risk’ of concession non-renewal

The Daiwa Institute of Research, a think tank based in Japan, believes that there is a “growing risk” that one or more Macau gaming concessions will not be renewed, or that they will be renewed “on less attractive terms.”
Representatives from the think tank noted that the Macau government will be conducting its 2015 mid-term review of the gaming industry, as gaming concession contracts expire between 2020 and 2022.
Daiwa acknowledged that the market generally expects that all of the gaming concessions will ultimately be renewed.
The contracts of current gaming operators do not stipulate conditions for renewal, but the government has still highlighted a few requirements that it will take into consideration when it comes to renewing gaming concessions, namely investment in non-gaming elements.
Daiwa noted that the market might have overlooked critical terms, part of which being that the Macau government could redeem concessions prior to their 2020/2022 expiration date in one of two ways. One way would be to give at least a year’s prior notice following June 26, 2017.
Under this provision, the concessionaire would be compensated based on the previous year’s EBITDA, multiplied by the number of years remaining until the concession expires. On the other hand, the government could also rescind contracts if a concessionaire fails to fulfill its fundamental obligations, either by committing fraud, or by failing to comply with government rules. This would result in an immediate termination of the gaming license, along with the seizure of assets by the Macau government and potential penalties, the research group indicated.