MGM China will get a $750m loan from parent company

MGM China has found itself in a bit of a predicament and short on money. This is why the US-based parent company, MGM Resorts International, will come to the Macau subsidiary’s rescue by offering a $750m loan. This is supposed to cushion some of the debilitating impact a full year of recurring COVID lockdowns and reduced travel had on the company and its MGM Cotai casino resort.

The loan with the parent company has been negotiated at an annual interest rate of 4% and a 24-month repayment deadline, which the company hopes it can meet once travelers begin to arrive in 2023, providing that there no further complications.

China has remained vigilant about its zero-COVID policy, forcing MGM Cotai to quarantine 1,500 people for seven days in early November. Macau casinos have been scurrying to find cash as they have felt the pinch of an economic recession due to dropping visitor numbers, which began in 2021 and has carried on well through 2021.

According to Asia Nikkei, which reported the news, MGM China is struggling with navigating the choppy seas in the Special Administrative Region. MGM China President Hubert Wang confirmed that the company has a widening third-quarter loss, and this could carry on, and was spending as much as $1.5m every day to stay operational.

Things could be looking up for Macau though, as mainland traveling has once again been reintroduced through a new eVisa regime that allows the government to quickly sort through applications and let people travel freely. The loan, though, is not so much an indicator of fear about the future or the sustainability of MGM China’s business right now.

Rather, it’s an indicator that MGM China feels confident about its ability to overcome this difficult spell, the company said to a statement shared with Asia Nikkei. Naturally, MGM China is not the only one that is being buffeted by the lack of visitors and recurring lockdowns. Other operators in the SAR, including Melco Resorts, SJM Holdings, Sands China, and Wynn Macau have been wrestling with the same problem.

Out of the ones mentioned, SJM Holdings seems to be the one that is burning through its cash reserves at a threatening rate that could make it harder for SJM Holdings to withstand future shocks if a path back to economic recovery is not found soon. Meanwhile, MGM Resorts International is aware that the $750m loan is hardly the only money that the subsidiary would need.

Presently, MGM China is hoping to secure a renewal of its license from the SAR’s government. Should it succeed, it’s definitely going to need more cash.

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