Tuesday, 15 November 2011

Macau junket operators get licence to lend

To get around debt collection issue, they get moneylenders’ licences in China


Guanyu 道 said...

Macau junket operators get licence to lend

To get around debt collection issue, they get moneylenders’ licences in China

10 November 2011

A growing number of Macau junket operators and their agents are getting licensed as moneylenders in mainland China to step up enforcement of gaming debt collections from Chinese gamblers, according to several junket industry experts.

‘If you’re licensed to lend, you can enforce the debt in mainland Chinese courts,’ said Tony Tong, an adviser with Friedmann Pacific Investment Holdings Ltd, a Hong Kong-based company that invests in junket operators in Macau, Hong Kong, the Philippines and Laos.

‘The licence allows the junket operator to recover loans by legal means and to take over any collateral. Typically, borrowers would say they need the loans for personal use or investment purposes even if they’re using it for gambling,’ Mr Tong said yesterday at the Asian Casino and Gaming Congress at Marina Bay Sands.

‘In the past, the junket operators would outsource debt collection to debt collectors in China, who collected by any means they can,’ he said.

Some gaming analysts believe that this is an effort by junket operators to skirt the problem of the unenforceability of gambling debt in China.

‘There’s no legal structure in China to allow junket operators or casinos to collect from the defaulting borrower on gaming debts. So the junket operator set up a structure such that it’s not a gambling debt they’re collecting but a general debt obligation,’ one Hong Kong-based analyst said.

Mr Tong and other gaming experts also touched on delays in approving junket operating licences in Singapore.

‘There’s always a concern that by licensing junkets, you’re facilitating credit collection by non-legal means, and that motivates political decisions,’ said Luis Mesquita de Melo, a Macau-based gaming lawyer and former vice-president, general counsel and company secretary of Sands Macau.

‘Singapore is going through the opening effect of gaming. It doesn’t mean it’ll always be like this. You may need to improve international marketing channels and bring other players to the Singapore casinos,’ he said.

Mr Tong agreed. ‘Once the two Singapore casinos have captured the direct players market, there may be a need to license junket operators if there’s still gaming capacity left and a need to attract more customers.’

Ultimately, it boils down to whether Singapore regulators really want junket operators to come, said Ben Lee, managing partner of Macau-based IGamiX Management & Consulting Ltd.

‘The processes and systems they have in place now are focused on obtaining negative information on the junkets rather than the positive factors,’ he said.

In contrast, Macau, which has 30-plus casinos and a 600,000-plus population, is heavily dependent on junket operators to bring in highrollers because there are not enough local players to support the market. Casino operators are prohibited from offering credit directly to players in China as the promotion of gaming activity is deemed illegal there.

While there are legitimate concerns about licensing junket operators in Singapore, Mr de Melo pointed to the industry’s efforts to improve transparency and gain credibility.

To attract investors and funding, many junket operators have submitted themselves to being more accountable to the government and regulators in Macau and Hong Kong, Mr Lee said.

‘To get funding, they have to disclose their contract arrangements, credit risks, shareholders, profit sharing with casinos, commissions earned, and expenses,’ he said.

Over the last five years, at least 10 Macau junket operators have obtained listings on the Hong Kong Stock Exchange. Last July, Asia Entertainment & Resources Ltd became the first Macau junket operator to get a Nasdaq listing.

One key advantage that Macau junket operators have is their direct relationship with central Beijing, which enables them to react quickly to certain situations, he said.

Guanyu 道 said...

‘Singapore is using American sources to gain intelligence,’ he said. ‘The responsibility of marketing casinos and collecting debts is devolved in Macau, whereas Singapore is trying to centralise that function.’

Without data intelligence about the mainland Chinese highroller, it is difficult for Singapore companies to know how to offer credit, manage borrowers’ risk or even funnel funds, given China’s opaque foreign currency controls, Mr Tong said.

‘Macau junkets are great volume multipliers. If Singapore wants more gaming revenue, then junkets are the key. Without them, there is a natural ceiling on potential long-term growth,’ Mr Lee said.