Studio City Owner Reports Risk Under Expected Macau Gaming Law
The owner of the Studio City casino resort in Macau has said it may have to transfer ownership of the physical premises of the casino (pictured) to the gaming operator, currently a unit of Melco Resorts and Entertainment Ltd, due to a proposal to amend the Macau Gaming Law.
Studio City International Holdings Ltd highlighted the issue in a Monday filing in the United States. The company is majority-owned by Melco Resorts, but there are minority outside investors who control more than 38% of Studio City International, according to company information.
Studio City International said, “We, not the gaming operator, currently own the Studio City Casino premises.”
The provision of the proposed new Gaming Law requiring a Macau-licensed operator to own a casino has been seen by a number of Macau Gaming Law commentators as primarily aimed at small town businesses, so-called “satellite” sites. They are controlled by third parties, but use – via a services contract – the rights of an existing Macau licensee.
Studio City International said, “In order to comply with the requirements of the proposed law, if enacted on its currently proposed terms, in order for gaming activity to continue at Studio City Casino, we would be required to transfer Studio City Casino premises to the gaming operator.
“To this end, we would need to seek an amendment to the terms of the Studio City land grant and comply with and complete various other administrative procedures for which [the] Consents, approvals and authorizations from the Macao government are required,” he added.
The company said if it was “unable to obtain” all necessary approvals and complete all required procedures during the three-year transition period, as the bill suggests, it “could have a material adverse effect” on its casino. operations, “including its suspension or termination”.
But he added: “The proposed law does not make clear how this would affect the status” of the company’s “existing services agreements or the arrangements implemented in those agreements after the three-year transition period.”
All of the provisions of the Gaming Bill have undergone a first reading in the city legislature on January 24 and are currently being considered at the committee level.
Studio City International’s revelations about how it could be affected by the new gaming law came as it announced plans on Monday to donate senior secured notesthe net proceeds being used to partially fund the capital cost of the ongoing Phase 2 construction of Studio City.
Studio City International said separately that day that it had entered into underwriting agreements for a private placement of US$300 million, priced at US$0.75 per share. It announced that its existing shareholders, who together hold more than 99% of the outstanding shares, have subscribed to the offer.