Melco Macau Subsidiary to Go to Court with Former Business Partner

Melco Resorts & Entertainment subsidiary COD Resorts Limited is readying up to meet in court with a former business partner, Luk Hing Investment Limited, which is accused of having defaulted on payments for property and failed to meet further business obligations. COD Resorts Limited decided to step in and take control of Club Cubic, which Luk Hing Investment Limited was unable to maintain as per pre-agreed obligations.

This happened last October, with the nadir of the pandemic still raging and limiting the influx of tourists and visitors to the City of Dreams Macau integrated resort where the club is based. This forced Melco’s hand and saw the company subsidiary step in and take the club which is now known as Para. But this is not all.

Moving the Right Pieces on the Board

COD decided to press on with a civil lawsuit against Luk Hing and ask for the $10.95 million the company said it was owed. However, Luk Hing has responded with a lawsuit of its own and the pair are likely to square up in a court of law before long. Interestingly, Luk Hing managed to do fairly well across the board during the pandemic, notwithstanding falling behind on financial obligations to the Para club.

In the meantime, the company’s Cubic Space+ nightclub in Zhuhai City and a restaurant in Hong Kong managed to weather the storm and remained relatively intact. This was not the case for Para, which Luk Hing may have chosen to sacrifice for the well-being of the other two. When COD initially launched the lawsuit, Luk Hing explained that the action was unreasonable.

The company argued that if it’s unable to cover rent, it would hardly be able to cover any payments on top of legal expenses and fees. Luk Hing decided to reciprocate though and asked COD to give up on  $738,920 worth of equipment located in Para.

The company even made this the basis of the counter lawsuit it launched against its former partner. However, COD dismissed the suit and argued that under the terms of the current contract, the company was entitled to the equipment. The two parties are likely to get a final ruling in court with a first appearance date still to be set.

Pandemic and Regulation Caused Litany of Lawsuits

Lawsuits in Macau have been all but uncommon these days. The region is still feeling the impact of the pandemic, which has caused many companies to default on obligations. Wynn Macau managed to win a case against a former partner who sought exorbitant damages to the tune of $7.5 million.

In another case, though, Wynn Macau was found liable for a payment of $770,000 to a VIP customer, along with junket operator Dore. With the industry far from chugging along at full throttle, legal disputes such as these are likely to continue flaring up in Macau. Overall, analysts consider the exposure to such liabilities by casino concessionaires to be small.