Cash crisis forces Macau to debate emergency share issue

Beleaguered Macau Property Opportunities has warned it may need to raise cash in order to cover its loan obligations.

Macau Property Opportunities (MPO) is debating an emergency share issue as it runs low on short-term cash.

The £34m portfolio of properties in the special administrative region of the People’s Republic of China has been selling off its assets in the gambling hotspot since entering wind down in 2022, but is now facing a fresh issue.

The Sniper Capital-run fund has been using the sale of its assets to meet its obligations to lenders and service providers as well as ‘protecting shareholder value’.

However, it appears the lenders are less than happy with the MPO’s ability to fund its loan repayments given the cashflow issues it has suffered in China’s prolonged real estate crisis.

The trust said it was in discussions with lenders to ‘closely monitor compliance with loan covenants and manage repayments of the company’s loans due in both 2025 and 2026’.

‘Management of covenants and repayment schedules necessarily has a close interplay with the company’s operating cashflow,’ said the fund.

‘As valuations have declined, lenders’ positions have noticeably hardened and the company continues to strictly and carefully manage its working capital position to meet obligations both to its lending partners and its service providers.’

An extension to its loan facilities for two developments until 2026 has been agreed with a new repayment schedule linked to the inflow of sales proceeds. Another loan extension for a different development has been agreed until January 2026, but the fund must pay an instalment of 12m Hong Kong dollars (£1.1m) by the end of November under the terms.

Sniper Capital said it was in ‘active dialogue’ with the lender over the November repayment.

The need to come up with cash quickly, has led the fund to consider a number of options, including an emergency capital raise ‘to meet short-term working capital obligations and provide a more stable platform for the orderly completion of the divestment process, which can preserve greater value for shareholders’.

The board confirmed a ‘carefully managed divestment’ was in the best interests of shareholders, and that ‘unnecessary acceleration of the divestment of the portfolio, or any forced sale of assets, would produce a poor outcome for shareholders’.

Shares in MPO were trading down 4.1% to just 15p today, taking losses since listing in 2006 to 85%, and a staggering 94% loss from its peak in late 2014 when the gambling industry was booming.

James Carthew, head of investment companies at QuotedData, questioned how ‘a company that has been in managed wind down for as long as MPO can get itself into a mess with loan covenants’.

‘If I was a shareholder, I would want to see heads roll for this,’ he said.