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Due to changes in gaming laws in Macau, MGM has undergone a financial restructuring. In this article, let’s take a look at why this was done and how.
Quick Facts About MGM Holdings
Company Structure: Parent company
Subsidiaries: MGM China Ltd, MGM Macau, and Cotai
Services: hotel, spa, casino, resort, and restaurant.
The company’s operations can be broken down into three reportable segments (indicating shares in consolidated revenues):
- Las Vegas Strip Resorts (46%)
- Regional Operations (38%)
- MGM China (16%)
Macau’s New Gaming Bill
On June 21, 2022, deputies of the Legislative Assembly of Macau approved in the second and final reading a new bill on the regulation of gambling.
The bill provides for the licensing of up to six casino operators for a ten-year term, with the possibility of extending the license for three years in exceptional circumstances. The document also imposes an official limit on the number of tables and slot machines in a new casino and a minimum annual casino gross gaming revenue (GGR) that all six operators in the city will have to meet.
The new legislation allows Macau authorities to inspect casino operations every three years. In addition, the document notes that the government is given the right to terminate a licensee’s contract for reasons including threats to national security and public interest, as well as for breach of contractual obligations.
As a result of the new bill, taxes and fees in general gambling paid to the Macau government have increased by 1% of gross gaming revenue. As a result, the current tax of 39%, including fees and charges, has risen to 40%.
The winners of licence tender became six current Macau casino licensees, including MGM China Holdings Ltd. They received licenses valid from January 1, 2023.
Financial Restructuring For License Renewal
The major casino arm of the MGM holding company, MGM Grand Paradise will get a whooping 4.8 billion patacas in order to meet up with the minimum base capital for operations according to Macau’s new gaming regulations.
The new law states that new casinos with rtp slot online operating under the jurisdiction of Macau province must possess a starting capital of about five billion patacas. Also, 15% of this capital must be held by a Macau permanent resident.
In order to satisfy this requirement, MGM China, which is the parent company, is poised to get about 85% of the starting capital, while the remaining approximately 15% will be held by its managing director, Pansy Ho, who lives in Macau.
In more explanatory figures, the parent company will acquire about 4 billion patacas in the form of shares, while the remaining shares of about 730 million patacas go to the chairperson. Also, there’s a separate performance bond that must be paid during the license renewal process, which is to the tune of 10 million patacas.
To shed more light on the new gaming regulations, the managing director previously held 10% in shares of the starting capital for more than 20 years. However, the province made it a point of law that the chairperson must also hold a Macau resident ID. The government wants a local that can be held responsible if something goes wrong in the casino’s operation.
Furthermore, in a statement released by Pansy Ho, the company intends to invest in health care if gaming revenues reach a formidable threshold. This development comes in tandem with current gaming regulations, which state that concessionaires must increase their non-gaming investments by 20% next year if gaming revenues surpass $22 billion this year.