Macau casino junkets struggling to collect debt from Chinese high-rollers

Macau’s casino junkets, who loan money to Chinese high-rollers for gambling in the city, have revealed they are collecting as little as 20 percent of the money they lend to VIP gamblers.

Kwok Chi-chung, president of Macau’s Association of Gaming & Entertainment Promoters said the problem has been building for some time. This compares to 2013, where 70 percent of loans were repaid promptly, he said.

In an interview with Bloomberg, Kwok said: “Getting the money back is a bigger challenge now for junkets than before. With a longer payback period, junkets have less money to lend to new customers, and the business size is shrinking accordingly.”

Tony Tong, co-founder of Pacific Financial Services Ltd., a Hong Kong-based firm whose services include debt-collection and risk management said it is increasingly difficult for junkets to recover money in China as gambling debt is illegal on the mainland.

“It’s very difficult for junkets to collect debt in China,” Tong said, estimating that as much as 50 percent of all credits to high-rollers are not fully paid when they’re due, and collection often requires “a lot of patience, begging and hassle.”

To mitigate their losses, junkets are now bundling bad debts and distressed assets and selling them to third-party financial investors at a discount, he said.

Casinos have shut down at least 30 upscale rooms dedicated to VIP gamblers over the past four months alone, Kwok said. “More VIP rooms will be shut. Quality will become the priority when it comes to lending, rather than quantity.’’ Kwok said that if there’s still debt by Lunar New Year, a traditional time where debts are paid, we will see more junkets closing their doors. “If there’s still much debt uncollected, the liquidity will be too tight for some junkets to survive and we’ll see more closures,” Kwok said. “Macau won’t return to the heyday.”