The Gaming Inspection and Co-ordination Bureau (DICJ) has issued an instruction to junket operators to stop offering credit to their customers and requesting that chip purchases can only be done for upfront cash, a note published by Sanford C. Bernstein states.
The order would effectively bar junkets from providing loan services to VIP gamblers, one of the pillars of their business model.
VIP junket operators have a network of agents or sub-junkets, which are usually localized groups around China and are familiar with the credit history of their clients. The sub-junkets receive a commission from the VIP junket operators for giving credit to gamblers and are responsible for collecting debts.
Under the Macau law regulating loans for gaming purposes, junkets are authorized to provide credit through a contract signed with a concessionaire or sub-concessionaire, with authorities allowed to suspend or cease the handing our of loans or impose conditions on this activity, whenever the credit grantor seriously violates the applicable legal and regulatory rules.
Concessionaires and sub-concessionaires, according to the same law, may also grant credit for gaming purposes directly.
The notice comes as reports surfaced by Hong Kong gaming media AllinMedia that Wynn Macau has issued termination notices for all its junket operated VIP rooms to be closed by December 20.
‘Some (if not all) other casino operators may also follow Wynn’s move with respect to the junket room operations,’ Bernstein added in the note.
In a previous report, Morgan Stanley analysts indicated that Wynn Macau (21 per cent), Galaxy (13 per cent), and Melco Resorts (~10 per cent) had higher EBITDA exposure to VIP when compared to the other three gaming concessionaires.
Macau News Agency inquired DICJ concerning the credit notice and VIP room closures, with the gaming watchdog only answering that it has so far not received any notification from gaming concessionaires that they would close VIP rooms run by junket operators.
The decision by Wynn comes as scrutiny of local junket operators businesses tightens and after the head of Suncity Group Alvin Chau Cheok Wa – the largest Macau junket operator – was detained by Macau police on suspicion of organizing illegal gambling activities for Chinese customers, including online gambling via its Philippine operation linked to proxy betting and involving gamblers based in mainland China.
Macau police detained Chau and 10 other individuals tied to Suncity shortly after Chinese in Wenzhou, Zhejiang Province issued an arrest warrant for Chau for violating a series of Chinese laws related to overseas gambling and financial activities and heading a syndicate that “causes severe damages to the social order of the country.”
Recently the Macau top court upheld a ruling by the Court of Second Instance (TSI) that previously found Wynn Resorts (Macau) S.A. (WRM) – an indirectly subsidiary of Wynn Macau and the direct gaming concessionaire holder in the SAR – jointly liable alongside junket operator Dore Entertainment Co. Ltd for the repayment of a HK$6 million (US$747,482) debt to several plaintiffs.
This court decision is seen by experts as a landmark ruling for the city’s casino industry and crucial in defining the responsibility held by gaming concessionaires for the actions of junkets.
Bernstein also noted that daily gaming revenues from 1 to 5 November reached MOP$260 million (US$32.4 million), up 14 per cent from the previous week although still 65 per cent lower than in December 2019.
