Fitch gives all Macau casinos a negative outlook.

In a note released this Tuesday (11), the Fitch Ratings risk rating agency pointed out that gaming operators in the former Portuguese-administered territory “are subject to short-term uncertainty regarding the regulatory and operational environment in the region, due to pending changes in gaming law, before the reopening of tenders (competition) for gaming concessions that expire on June 26, 2022”.

For this reason, Fitch Ratings explained, all game operators, concessionaires and sub-concessionaires, have been on “Rating Watch Negative (RWN) [Negative Outlook] since December 10, 2021”.

The Macau government intends to proceed with a public tender to award new concessions, as the current ones expire on June 26, 2022, and has also decided to review the legal framework for the operation of games of chance in casinos.

Most opinions expressed in the public consultation on the revision of the gaming law advocated for a total of six concessions, without sub-concessions, with a contract of less than 20 years.

Macau currently has three concessionaires – Sociedade de Jogos de Macau (SJM), Galaxy and Wynn – and three sub-concessionaires – MGM, Venetian (Sands China) and Melco.

"Macau regulators are working on draft legislation for the next round of gaming concessions with the aim of adjusting regulations to incorporate societal opinions and relevant issues, given that the current gaming law was created two decades ago," the agency noted.

Operator ratings will be downgraded if changes to the law affect companies' cash flow and balance sheets, Fitch stressed, adding that the recovery in visitor numbers to the territory, which depends almost exclusively on Chinese tourism as a result of the uncompromising policy of zero Covid-19 cases, is not materializing.

In 2019, Macau received almost 40 million visitors, and tour operators generated revenues of 292,4 billion patacas (approximately 31 billion euros), figures that have fallen drastically in the last two years due to the pandemic.

Regarding the changes to the gambling law, the agency believes that "the Government will adopt a pragmatic approach," since operators are the largest employers in the territory and the biggest contributors to public coffers thanks to the taxes they pay on gross gambling revenue.

Gaming accounts for approximately 80% of the government's revenue and 55,5% of Macau's gross domestic product (GDP).

Still, Fitch warns that "there are no guarantees that the changes made are not unreasonable."

“The range of outcomes that could affect cash flow and leverage is vast and potentially includes, but is not limited to, higher gaming taxes, increased local ownership, dividend restrictions and changes in the competitive landscape,” the agency stressed, referring to the new tender.

The discourse regarding economic diversification in the territory has been a constant in recent years.

However, after the pre-trial detention ordered in November for the CEO of the gambling promoter Suncity, Alvin Chau, this discourse gained even more strength and was reinforced by 'messages' given by the President of China, Xi Jinping.

“The pandemic (…) forced people to reflect. Thus, all sectors of Macau society now have a clearer understanding of the existing problems in the economic structure and will have to reflect more deeply on the direction of the region’s development,” said the Chinese leader, during an audience granted to the territory’s Chief Executive, Ho Iat Seng, on December 22.

The VIP casino lounge model appears to be coming to an end in the world's gambling capital, with all the lounges of the biggest high-stakes casino operator, Suncity, closing on November 30th.

A few days later, the Macau Government released the second five-year plan outlining the socio-economic development path for the Macau Special Administrative Region (MSAR), which aims to increase the proportion of mass-market gambling in the territory's casinos, at a time when VIP gambling has been questioned by the territory's authorities. ( RTP Notícias /Rádio e Televisão de Portugal – by Lusa)