The boss for American casino operator Wynn Resorts Limited has reportedly explained that the temporary shutdown of his firm’s two Macau properties is costing the company up to $2.6 million every day.
According to the report, the Las Vegas-headquartered company is responsible via its local Wynn Macau Limited subsidiary for the 1,000-room Wynn Macau as well as the even grander Wynn Palace Cotai. Both venues were shuttered for a 15-day period from Tuesday as part of a city-wide plan designed to help stop the spread highly-contagious ‘Wuhan virus.’
GGRAsia reported that Matt Maddox serves as President and Chief Executive Officer for Wynn Resorts Limited and that he had used a Thursday conference call with investors to declare that the Macau shutdown is penalizing the firm by ‘roughly $2.4 million to $2.6 million a day’. The executive purportedly also proclaimed that most of this amount at around $1.9 million is ‘comprised of payroll to our 12,200 employees’ although the operator is ‘not looking into cutting that at all.’
Maddox reportedly stated…
“Now is the time you invest in your people. You don’t do something short-term that would hurt the culture and cause any distraction. We know that this is going to be temporary and we think that it is the right long-term investment.”
Maddox reportedly announced that Wynn Macau Limited had conducted a ‘controlled and organized’ closure of its Wynn Macau and Wynn Palace Cotai properties and that it is ‘a little early’ to predict when operations might return to normal as the local government could still extend the current shutdown in the face of a worsening spread of the coronavirus strain.
The executive reportedly told investors…
“We do still have our hotel and a couple of restaurants open for the few remaining guests that are in Macau. The team on the ground is working with the government on a daily basis and watching very carefully if there will be any continued outbreak of the virus. We do feel good about the long-term aspect of Macau as soon as the virus is completely contained.”
Maddox reportedly stated that his company’s Macau business had been ‘set up for a good 2020’ before the ‘Wuhan virus’ outbreak, which has so far killed approximately 630 people in neighboring China, with daily normalized earnings before interest, tax, depreciation and amortization for the 19 days from December 23 of about $4 million. He had earlier purportedly detailed that his firm had recorded a company-wide fourth-quarter loss of $72.9 million alongside a 2% decline year-on-year in overall revenues to just over $1.6 billion.
GGRAsia additionally reported that the Wynn Resorts Limited will not be able to use insurance to cover any of its Macau shortfall as the firm’s Chief Financial Officer, Craig Billings, is said to have told investors that such as safety net is only applicable to ‘a physical event’.
Billings reportedly stated…
“That obviously is not the case here so we do not expect material business interruption coverage proceeds from the coronavirus event.”
The finance chief reportedly furthermore told shareholders that the majority of his firm’s ‘debt stack’ was comprised of long-dated unsecured bonds with no maintenance covenants but that its pair of bank facilities did contain such facilities to give the company sufficient cushions to weather the Macau closures.
Billings purportedly proclaimed…
“The United States facility has more than ample covenant headroom to sustain a very prolonged period of suppressed business volumes in Macau and the Macau facility does have a maintenance covenant that is sensitive to Macau earnings before interest, tax, depreciation and amortization. We have a ton of liquidity, we have a couple of billion dollars between cash and revolver in Macau and that’s sufficient to last for really any period of closure.”
Regarding the fourth-quarter performance of Wynn Macau Limited, it was reported that the subordinate’s net profit had declined by 2.6% year-on-year to $182 million with its operations in Macau experiencing a 4.9% drop in earnings before interest, tax, depreciation and amortization to $347.7 million as well as a 13.8% decrease in operating revenues to $1.1 billion.
However, the subsidiary’s President, Ian Coughlan, reportedly told investors that his firm had been doing ‘a good job’ when it came to controlling costs without ‘hurting the quality of service, product and facility.’ He moreover declared that the enterprise had been ‘able to bring headcount down’ courtesy of a ‘hiring freeze’ and was now ‘well prepared to drive strong operating leverage’ when the casino market in Macau ‘returns to normal.’