Wynn Resorts, one of three Nevada-based companies operating in Macau, warned on Tuesday that U.S.-China trade disputes and the tensions between the two superpowers have continued to escalate in 2020, resulting in “contentious punitive or retaliatory measures being imposed on businesses and individuals.”
The comments, which were made in a filing with both the Hong Kong Stock Exchange and U.S. Securities and Exchange Commission, marked the first time a U.S. gaming company has openly discussed the pressures between the two nations.
Wynn, which operates Wynn Macau, Encore Macau and Wynn Palace on Macau’s Cotai Strip, is seeking to raise an undisclosed amount of financing for its Macau subsidiary through the additional issuance of new debt. Wynn Resorts owns 72% of Wynn Macau.
Among the risk factors Wynn Resorts noted in the filing was the COVID-19 pandemic, which has altered the global macroeconomic environment, causing an extended economic downturn and “even a potential global recession.”
Prior to the pandemic, Wynn Resorts collected upward of 70% of both its quarterly and annual revenues from its operations in Macau.
Wynn said the dispute over trade policies between the U.S. and China has now expanded into “national security and national and regional politics.”
Wynn cited the recent U.S. government ban on the use of the app WeChat, which is widely utilized by the company’s Chinese customers.
“We are unable to ascertain the scope of the ban at this point, and there is no assurance that the ban will not adversely affect our ability to communicate with certain of our customers,” Wynn said in the filing. “Sustained tensions between the United States and China could significantly undermine the stability of the global economy in general and the Chinese economy in particular.”
Wynn said the company has been recognized for its contributions and philanthropic efforts in Macau and the Greater Bay region. The company said the vast majority of its employees are local Macau residents or Chinese nationals.
Wynn’s Macau gaming license, along with those of Las Vegas Sands and MGM Resorts International, expires in 2022. In its filing, Wynn said, “our business and prospects may be negatively impacted by the fact that we are majority-owned by a U.S. company should the U.S.-China relationship further deteriorate.”
Las Vegas Sands is spending $2.2 billion in renovations and expansions to Macau properties, including a transformation of Sands Cotai Central into the Londoner Macau, a London-themed resort. Wynn had planned to spend a further $2 billion on the non-gaming Crystal Pavilion, a hotel and entertainment complex next to Wynn Palace. Construction on that project was expected to begin next year.
Macau gaming revenues have been decimated in 2020 due to the COVID-19 pandemic, which struck the Special Administrative Region of China in January, canceling the market’s lucrative Chinese New Year’s celebration activities.
Casinos in Macau were closed for 15 days in February and the ongoing pandemic, along with travel restrictions, have combined to reduce visitation and customer spending to historically low levels.
In July, Macau’s total gaming revenues were just $168 million, a decline of 94.5%, which followed a record 97% decline in June. In 2019, Macau produced $36.5 billion in gaming revenues.
In the second quarter, Wynn Resorts said its Macau properties collected a combined operating revenue of $20.6 million, compared to $1.54 billion a year ago.
“Our financial results have been, and are expected to continue to be, affected by the economy in China,” Wynn said. “Any severe or prolonged slowdown in the global or Chinese economy may materially and adversely affect our business, results of operations, and financial condition.”
Shares of Wynn closed at $81.63 on the Nasdaq, down $1.87 or 2.24%.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
