Fitch Says Termination of US-Backed Macau Gaming Licenses ‘Highly Unlikely’ Despite Geopolitical Tensions

The "termination or non-renewal" of gaming licenses held by US-backed operators in Macau would represent a "worst-case scenario," but analysts at Fitch Ratings said in a Thursday note that such an outcome is "highly unlikely." In one projected scenario, Fitch suggested US operators could be "compelled to cede their Macau operations," but stressed that this "could become more plausible if US-China relations deteriorate further in the medium term," a development "not envisaged in the forecast horizon."

Sands China, MGM China, and Wynn Macau are understandably assessing the risks of potential retaliation following the escalating tariff measures initiated during the administration of US President Donald Trump. Yet, with Trump’s presidency set to conclude in 2029—barring any constitutional changes—and Macau’s new 10-year gaming licenses extending to 2032, the timeframe appears to offer some insulation from political turmoil.

Considering that gaming taxes contribute approximately 80 percent of Macau’s total tax revenue and that the sector directly and indirectly employs tens of thousands of residents, it would be against the best interests of the Special Administrative Region (SAR) to allow the US-China trade conflict to seep into its own political and economic decision-making.

Moreover, all six of Macau’s licensed gaming operators have pledged substantial investments in non-gaming sectors within the city. Jefferies data reveals that Sands China has committed around $416.48 million annually to non-gaming initiatives, MGM China about $224.72 million per year, and Wynn Macau approximately $210.11 million annually, each falling just short of their full concession obligations.

Fitch noted that previous diplomatic disputes have seen China "target foreign companies" but usually through "increased regulatory scrutiny rather than outright bans." Given Macau’s distinct judicial and legal systems, largely independent of mainland China, any punitive action against US gaming companies would necessitate the SAR passing its own laws or administrative regulations.

Another avenue for potential retaliation could be a consumer boycott. However, Fitch pointed out that despite earlier tariff escalations, gaming revenues in Macau have remained relatively stable, suggesting consumer sentiment has not significantly shifted. Punters, the analysts said, tend to base their decisions on factors such as comfort, accessibility, and credit facilities, rather than geopolitical politics. Even in the case of a boycott, Fitch stated that historically "they tend to be short-lived."

Nevertheless, any instability in Macau’s gaming sector would impact operators' financials. Las Vegas Sands currently derives 63 percent of its consolidated 2024 revenues from Macau, Wynn Resorts 52 percent, and MGM Resorts International 23 percent, making any fluctuations in the SAR particularly significant for their bottom lines.

While acknowledging that US gaming companies "could be subject to retaliation," Fitch underscored that a "weaker economic outlook in China is likely to pressure gaming revenues and earnings in Macau" to a greater extent. Still, the strong financial structures of these operators could "mitigate some of these risks." Importantly, Macau operations are owned through non-wholly owned subsidiaries listed on the Hong Kong Stock Exchange, providing a legal separation that "ringfences" the Macau businesses from their US-based parent companies.

"The US entities and international subsidiaries have separate debt issuances with outstanding balances roughly proportionate to EBITDA generation, and there are no guarantees between parents and subsidiaries," Fitch wrote.

Company by company, Fitch highlighted that "LVS has ample rating headroom at current levels" and that "liquidity is abundant." Meanwhile, MGM and Wynn "also have adequate rating headroom at current levels," suggesting that the operators are well-positioned to weather potential challenges ahead.

By fLEXI tEAM