Question of the Day - 24 January 2022

[Editor's Note: This answer is penned by David McKee.]

There’s no risk factor involved in the sale of the Las Vegas assets in terms of its impact on the machinations in China. The Venetian/Palazzo/Venetian Expo Center sale involves strictly U.S. assets and thus is no concern to the Macanese and/or Chinese authorities. It was the same when Las Vegas Sands sold Sands Bethlehem to the Poarch Band of Creek Indians. If it isn’t happening in China (or directly affecting Chinese business), the bosses in Beijing and Macao frankly don’t care.

But let’s take it a step further. The Sands China gaming concession in Macao is due for renewal — or rebidding — this June. Your questions seems to ask, What happens in the extremely unlikely event that the Macanese authorities kick Sands to the curb?

There might be some risk here. According to Brendan Bussmann of Global Market Advisors, we’re entering unknown territory.

“The process of a potential re-tender of a concession has not been spelled out,” he wrote us. He added, “This has been one of the many questions that has been in the mix,” at least until a December governmental report that was mostly favorable to the six concessionaires in the city. Which would seem to bode well for Las Vegas Sands' future interests there. 

You can’t own a casino in Macao; you lease it from the government. But the transfer of assets from one concessionaire to another would be business as usual.

Bussman explains, “I believe the transaction would be handled in a similar way as you see with the operational sale of assets in Las Vegas, with the exception that it wouldn’t be a lease payment like you see with VICI and MGP currently.”

In other words, in the extremely unlikely event that the Sands loses its casino concession, the company can and would sell it for a lot of money.

Whom Sands might sell it to is another can of worms. An attempted sale of a casino operation to a company currently not in Macao would be, to mix a metaphor, an entirely different kettle of fish.

But again, City Hall is seemingly satisfied with its six existing concessionaires and would presumably be disinclined to allow a seventh (or eighth) into the picture … at least not without an agonizing reappraisal of the entire casino regime in Macao at present.

The one big change that may well be in the offing would be an elimination of the current concession/sub-concession arrangement. Originally, there were to have been three gaming concessions in Macao: venerable Sociedade de Jogos de Macau (SJM), newcomer Wynn Resorts, and a government-engineered shotgun wedding of Galaxy Entertainment and Las Vegas Sands. When Sheldon Adelson (inevitably) fell out with Galaxy, three sub-concessions were created. Sands got one, SJM sold its sub-concession to then-MGM Mirage and Melco Resorts & Entertainment bought Wynn’s sub-concession. It’s considered probable that this two-tier system will be junked in June in favor of a system in which the sub-concessions are promoted to concessions, giving all six casino companies parity.

Then again, we’re talking about Chinese politics, which are anything but predictable, as casino operators have often found out, sometimes to their dismay. We'll know much more by the middle of this year.