SJM Holdings could access US$637m loan from shareholder STDM

The casino operator continues to face a critical financial situation and could seek a loan from its largest shareholder to confront liquidity problems.

Macau.- A day after posting a loss of HK$1.28bn (US$163.4m) for the first quarter of the year, SJM Holdings has revealed it could access a HK$5bn (US$637m) loan from controlling shareholder STDM. However, Sanford C. Bernstein noted that no details have been provided about the possible arrangement.

They said: “Management also confirmed that there is no gaming regulator or government approval in terms of the potential shareholder loan nor is any bank covenant limiting the ability to draw funds from STDM.”

Analysts Vitaly Umansky and Louis Li noted that the company only has liquidity for three to four months and pointed to the opening of the Grand Lisboa Palace in June 2021 as a cause of economic difficulties.

SJM reported that gross gambling revenue for the first quarter of the year fell 4.2 per cent year-on-year to HK$2.54bn. Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) came in at negative HK$474m.

JP Morgan has warned SJM Holdings’ loan refinancing has stalled due to government delays, which will likely require the company to seek external funding, either through debt or capital. Meanwhile, due to Macau’s proposed ending of the current sub-concession system, SJM will have to bring gaming staff at 14 satellite casinos onto its own payroll.

JP Morgan stated: “This could lead to an additional operating expenses burden for SJM Holdings in the second half of 2022, as it may need to convert some staff – i.e., the staff from satellite casinos that decide to cease gaming operations – onto its direct payroll.”