Future in question for Macau satellite operator

Macau Legend Development Faces Financial Turmoil: A Detailed Analysis

Macau Legend Development (MLD), a prominent player in the satellite casino landscape, has reported staggering losses amounting to HK$667.23 million (approximately £66.7 million, €80 million, or $86 million) for the fiscal year 2024. This marks a sharp decline from the previous year, where losses were merely HK$4.9 million.

The company disclosed in its filing on March 28 that it is grappling with net liabilities totaling HK$2.51 billion, which includes HK$2.41 billion in loans due for repayment within the next year. This precarious financial position is exacerbated by past failures to comply with specific loan covenants, rendering HK$2 billion in loans “immediately repayable if demanded by creditor banks.” MLD further indicated that even the current default of HK$166.4 million is unlikely to be resolved, raising substantial concerns about its ability to remain operational in the foreseeable future.

Cabo Verde Withdrawal: A Strategic Setback

Founded in 1997, MLD operates the Macau Fisherman’s Wharf, a leisure and entertainment complex touted as the largest of its kind on the Macau Peninsula. The company also runs a casino at the Legend Palace Hotel under SJM Holdings’ concession. Initially, MLD had ambitions that extended far beyond Macau’s borders; however, in 2023, its president and CEO, Li Chu Kwan, announced a strategic pivot towards core operations in Macau, abandoning international projects. A notable divestment included the sale of its Savan Legend casino in Laos for HK$303 million, intended to boost liquidity amidst increasing operational constraints.

However, the anticipated financial relief from these moves did not materialize. In late 2023, Cabo Verde terminated its nearly decade-long agreement with MLD, citing “flagrant and repeated” violations of contractual obligations related to a proposed HK$2 billion casino complex. Originally signed in 2015, the ambitious project aimed to span 160,000 square meters in Praia but stalled, having progressed only to the construction of rudimentary structures.

The Cabo Verdean Prime Minister, Ulisses Correia e Silva, publicly condemned MLD for transferring ownership of over 20% of the project’s share capital without government consent, compounded by previous criminal convictions involving MLD’s top executives. Notably, in April 2023, Levo Chan, the former co-chairman and majority shareholder of MLD, was convicted of illegal gambling and money laundering, sentenced to 14 years in prison, and mandated to repay HK$780 million to the Macau government and several major local casino concessionaires.

Critical Dependency on Lenders for Survival

The financial stability of MLD is now contingent upon the support of its lenders. The recent filing emphasized that the group’s continuation is heavily reliant on its ability to generate sufficient operating cash flows and secure financing.

MLD is actively seeking lender cooperation to avoid immediate repayment demands stemming from its loan covenant violations. The company’s strategy includes restructuring outstanding debt installments due in 2025, while also appealing to its controlling shareholders to refrain from requesting repayment of shareholders’ loans amounting to HK$339.4 million.

To mitigate its current crisis, MLD has underscored its commitment to implementing a comprehensive cost control program aimed at improving operational efficiencies and stabilizing its financial footing.

As the gambling industry continues to evolve, MLD’s situation serves as a stark reminder of the inherent risks and challenges faced by operators within this dynamic sector. The outcomes of the company’s current strategies and lender negotiations will ultimately determine its future trajectory in Macau’s fiercely competitive gaming environment.