Macau casino junkets bundling bad VIP gambling debts and selling at a discount

Macau casino junket operators are collecting as little as one-fifth of the money they lend to VIP gamblers, threatening not only their ability to offer loans to new gamblers but also the junkets’ very survival.

Kwok Chi Chung, the head of Macau’s Association of Gaming & Entertainment Promoters, gave an interview to Bloomberg last week in which he revealed that junkets were currently collecting only around 20% to 30% of their high-roller loans. In 2013, when Macau’s 18-months-and-counting revenue decline was still an unimaginable situation, Kwok said 70% of loans were repaid promptly.

The problem has been building for some time. A year ago, the Hengsheng Group junket reported that one-third of its outstanding VIP debts were more than a year old. Earlier this year, Macau’s Court of First Instance was flooded with new lawsuits filed by junkets in pursuit of repayment.

Tony Tong, co-founder of Hong Kong-based debt-collection and risk management firm Pacific Financial Services Ltd, said the junkets’ average collection period had gone from its traditional window of one to six months to today’s 12 to 18 months.