Macau’s hotel occupancy rate was 60.7% in June, the second lowest since the 2003 Sars outbreak.  The rate was down 12.6% from the same period in 2008.  Analysts are blaming swine flu, along with 300 new rooms being added when City of Dreams opened in June, as well as the lingering economic downturn. 

There was also a sharp drop in package tours from the mainland.  The central government began cracking down on low-fare tours involving compulsory shopping.  The new regulation forbids travel agencies from operating tours below costs.  Package tour visitors dropped by 46.1% in June compared to the same period in ’08. 






LVS announced that it had struck a deal with its Venetian Macau Limited creditors, allowing it to raise more cash and giving them additional room to navigate under its leverage ratio covenants by raising the maximum permitted covenant.   Many analysts are now convinced that a filing of a Hong Kong IPO is now imminent (within two weeks).  The shares jumped sharply yesterday; and are up 50% in the last month alone.

From the creditors’ perspective, VML is now in the clear to file for the IPO and/or raise new debt in Macau.  The amendment includes six quarters of relief from its loan covenants and allows it to sell a minority interest in its Macau operations.  The interest rate for the loans under the credit facility has now increased to Libor plus 5.5%.  If LVS sells the stake in its Macau operations and prepays US$500 million of outstanding loans, the rate would drop 100 bps to L + 4.5%.



LVS is a company where senior executives working in Asia generally only last a few years.  The latest casualty, Len de Angelo, senior vice-president for operations in the region, is the latest to move on.   For him to leave at a time so close to the opening of the Marina Bay Sands, which is the world’s most expensive integrated resort, indicates that something obviously went awry.   Two new people have been appointed to run the Marina Bay Sands in Singapore: Thomas Arasi will be president, and Ronen Nissenbaum will be executive vice-president for operations.  Both men have extensive hospitality experience, but neither has any gaming experience…



MPEL’s recent announcement of its effort to raise US$200 million through an American depository shares offering will, according to Lawrence Ho, “better position us to be able to pursue future development opportunities while at the same time maintaining our rigorous approach to balance sheet prudence.”

Ho is restricted in terms of what he can do with the liquidity available on his US$1.75 billion senior secured facility. He has to use it on construction of what he told the bankers he was going to construct.  Raising some more cash to deleverage, or even just change the loan terms, gives him more flexibility to realize the first part of his statement. 

DM believes that the major point to be taken from this story is that Macau is “starting to heat up again”, and that anyone who doesn’t have the flexibility to do something or buy something would be foolish not to avail of an opportunity to gain that flexibility. 



Macau business published an online report alleging that Galaxy Entertainment Group has postponed the opening of its Cotai resort until December 23, 2011.  The 2,200 room “Mystical Oasis”, which is likely to undergo a branding change before then, is scheduled to have its exterior finished by the end of this year.  The interior should not, theoretically, take more than 18 months so there should be ample time to finish the project by the end of 2011.

The group is clear in its intention to observe the demand in Cotai rather than pursue a “build and hope” strategy.  DM asks if the Lui family will end up ruing the window of opportunity afforded by the delay on Lots 5&6 to capture market share if Macau turns hot again, as it appears to be doing now. 



Although the summer got off to somewhat of a slow start, it seems likely that a record number for the month is on the cards, certainly more than US$10 billion.  More importantly for the Big Six, the mass floors have gained new life and the hotels are filling up.  This weekend, COD and the Venetian are sold out.

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