Casino investment in the U.S. has largely been a bust for private equity firms. However, two funds — Silver Point Capital and Oaktree Capital Management — could be about to hit the jackpot in Macao. 
It seems that Melco Crown Entertainment just secured a package of loans and credit lines. What do Lawrence Ho and James Packer plan to do with all that money, especially since they intend to draw down the loan portion immediately?
The answer is, buy out Silver Point and Oaktree, making Melco Crown the sole owner of Studio City, its rescue project on the Cotai Strip. The two U.S. funds own 40% of the project, holdovers from its pre-Melco days. Gaming analysts at Sanford Bernstein 
looked at Melco Crown’s recent moves and concluded, “We estimate that the 40 percent interest in Studio City held by New Cotai can be acquired by MPEL … at a price tag of approximately US$1 billion.” That would really make it rain for Oaktree and Silver Point, which have been minority partners since Ho and Packer rescued the project in 2011. The latter, however, will likely face the same stingy allotment of new table games faced by Galaxy Entertainment. The Sanford Bernstein braintrust expects a sort of cap-and-trade scenario whereby underused tables at Altira and City of Dreams (above) find their way to Studio City.
Galaxy, for its part, is expressing disappointment with early returns from Galaxy Phase 2, calling them “satisfactory, but not as good as what we expected.” The underperformance of the Macanese economy is 
also being felt at City Hall, where the government is preparing for a deficit and talking about “retrenchment measures,” even though the government is sitting on a $44 billion surplus. However, this could mean delays in the construction of promised infrastructure and a diminution of the public payroll. The bad news is that visitation from the mainland is down and the good news is that those who are coming skew toward the more-affluent end of the scale. Despite a weak springtime, Macau Government Tourist Office Director Maria Helena de Senna Fernandes predicts a near-term turnaround, which will be music to the ears of all resort operators in the market.
One factor being overlooked in the focus on Macao’s shifting fortunes, Daiwa Securities Group analysts contend, is the possibility of one or more casino concessions being nationalized. They write, “many have 
overlooked critical terms on the licensing contracts that state that the Macau government can redeem concessions prematurely.” Thanks to a no-fault clause, Macao doesn’t even need a reason, although it can fault concessionaires for failing to meet construction deadlines, among other justifications. (Slowpoke Sociedade de Jogos de Macau might want to think about that.) It’s not a one-sided proposition: Concessionaires get a golden parachute in the form of last year’s EBITDA multiplied by the number of years remaining on the concession.
If SJM and MGM Resorts International make it to 2020 unscathed, and everybody else gets through to 2022, the government can then renew the concessions in two-year increments … although it has wide latitude even in that. Generally speaking, it’s a good idea to take nothing for granted when operating in Macao.
* China has been losing gamblers to overseas markets and it may soon have a new rival: Thailand. That country’s finance minister, Sommai 
Phasee, is looking with favor on the idea of casinos … provided that they’re integrated resorts. Singapore is the role model, right down to the idea of a daily admission fee imposed on Thai citizens who want to gamble. Phasee favors only a limited amount of casino product, which dovetails with the advisory National Reform Council‘s endorsement of resort casinos, possibly in oceanside Pattaya.
The NRC’s motivation, unlike Phasee’s, is to keep gambling dollars in Thailand, away from Cambodia and Vietnam, although both cite tourism as their primary goal. While only a rump faction of the NRC supports casinos at this point, it just needs to persuade the country’s ruling military junta and the scales will be tipped in gambling’s favor.
* “Broken-tooth Koi” is back. The aging once (and future?) head of the 14K Triad Society has finished a 14-year stretch in the big house for money laundering and loan sharking. So how does a 60-year-old felon celebrate his freedom? By opening a VIP gambling room, what else? Press reports are derelict in reporting where Wan Kuok-koi will set up shop, although my money’s on SJM. Ominously, the mobster is reported as “gearing up to retain control over the gaming industry.” He’s also gained respectability, in the form of a seat on Chinese People’s Political Consultative Conference. Web channel Next Media glowingly describes Kuok-koi as “Bold enough to open a VIP room in gaming industry’s ‘ice age’ … showing his ability to succeed where others fail.” Not even favorite son Stanley Ho gets such rave reviews in China.
(The American Gaming Association reported this news with the anodyne headline, “New VIP gambling room opens in Macau.”)
