Macau Legend says material uncertainties around ability to continue as mounting debts spark loan default

September 14, 2022 Macau Casino & Hotel

Macau Legend Development Ltd has warned of “material uncertainties” that may cast significant doubt over its ability to continue as a going concern after confirming it has breached loan covenant clauses that have constituted an event of default with its lenders.

Publishing its long-delayed financial results for the six months to 30 June 2022, which saw the company fall to a net loss of HK$486 million (US$62 million), Macau Legend said its total bank borrowings were currently HK$2.37 billion (US$302 million) of which HK$237 million (US$30 million) is due for repayment within the next 12 months.

But burdened by the ongoing effects of the COVID-19 pandemic, the company’s cash and cash equivalents amounted to just HK$66 million (US$8.4 million) at the end of the reporting period.

“As at 30 June 2022, the Group had breached certain loan covenant clauses and, as at the date of approval of the interim financial information, the Group is in the process of applying for a further waiver from the creditor banks,” it said.

“The non-compliance constituted an event of default, such that the Banks may exercise their rights to serve notice to demand immediate repayment of all outstanding bank borrowings including interest. Accordingly, the bank borrowings of HK$2.37 billion has been reclassified as current liabilities.”

Macau Legend said it is undertaking measures to improve its position, including asking its banks to provide continuous credit facilities to the group, obtaining the banks’ agreement for further amendment of the covenants and/or granting a waiver on the breach of loan covenants and extension for repayment of the group’s bank borrowings, and successful and timely completion of a divestment plan.

“Should the Group fail to achieve the above-mentioned plans and measures, it might not be able to continue to operate as a going concern, and adjustments may have to be made to write down the carrying value of the Group’s assets to their recoverable amounts, to provide for any further liabilities which might arise, and to reclassify non-current assets and non-current liabilities as current assets and current liabilities, where applicable,” it said.

Macau Legend’s 1H22 results saw total revenue climb by 3.1% year-on-year to HK$543.8 million, comprising service income received from SJM for gaming services provided and revenue from its casino operations in Laos. Gaming revenues grew 6.7% year-on-year to HK$449.3 million.

Adjusted EBITDA was a loss of HK$160.5 million, widened from a loss of HK$132.9 million recorded 12 months earlier.

Macau Legend owns the Macau Fisherman’s Wharf precinct where it operates Legend Palace and Babylon casinos. It also runs Savan Legend in Laos.

Shares in the company resumed trading on Tuesday, having bene suspended since 1 September pending publication of its 1H results.