Steve Wynn Is Overplaying His Hand in Macau: David Fickling

In negotiations and card games, it’s never a good idea to show you’re rattled. Steve Wynn, of all people, should know that.

Shares in Wynn Macau have fallen 8.4 percent since Oct. 15, after the casino mogul took the Chinese territory’s gambling authorities to task for the sluggish pace of gaming approvals. It’s “outrageous and ridiculous” that his rival Melco Crown didn’t yet know how many gaming tables it would have at its Studio City resort set to open Oct. 27, he told investors on a conference call; business planning in the city is now “almost a mystical process.”

Macau’s response was swift. Over the weekend, casino executives were hauled in to a meeting with senior politicians and regulators, who demanded “full compliance” and issued a thinly veiled rebuke to Wynn’s comments. Overnight, Melco was told it could have 250 gaming tables at its new venue, the upper end of analysts’ estimates.

Wynn’s frustration is understandable. While analysts have already adjusted their table estimates to reflect a more subdued climate, Melco told investors who bought its $825 million of 8.5 percent bonds, issued to finance Studio City in 2012, that it expected to have twice that number. Those notes, sold at 100 cents on the dollar, touched a record low 91.9 cents last month. It’s hard to dispute Wynn’s argument that the decisions of the city’s authorities are arbitrary. There’s a gap between understandable behavior, however, and behavior that is politic.

Macau’s push toward mass-market gaming is no secret. The caps on gaming tables that Wynn railed against were first announced in 2010. Part of Wynn’s appeal to local authorities is precisely his pivotal role in transforming Las Vegas from Sin City into a family-friendly home for Versace boutiques, actuary conventions and Siegfried & Roy exhibits.

Melco Crown may have some difficult conversations ahead with its bondholders. As Standard & Poor’s pointed out in a June note, failure to secure at least 400 gaming tables by Oct. 1 next year could trigger a technical default and payment acceleration. But the company still has one of six cherished casino licenses in the only place where China allows gambling. The uncertainty on tables wouldn’t affect Studio City’s credit rating, S&P said at the time.

Like it or not, casinos are a heavily regulated industry. Getting along with the government is just a cost of doing business. If Steve Wynn wants to protect the value of his investments in Macau, he should recognize whose table he’s playing at, and remember that the house always wins.

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