Melco Resorts Weighs City of Dreams Manila Sale to Slash Debt

The leadership at Melco Resorts & Entertainment is under significant pressure to restructure its balance sheet. While global gaming markets have shown signs of recovery, massive liabilities continue to weigh on the company's financial health. According to recent assessments from Seaport Research Partners, divesting from the City of Dreams Manila integrated resort could be the primary lever to ensure long-term stability. Although the Philippine property exceeded expectations in the second quarter of 2026, experts increasingly view it as a distraction from the core business in Macau.

A sale process is not a new concept for Melco. The company previously attempted to offload the asset last year, though no transaction was finalized. Senior Analyst Vitaly Umansky emphasizes that this past failure should not deter a new attempt. Even at a lower valuation than initially sought, a transaction would create substantial value. The strategic priority is clearly debt reduction, with consolidated debt standing at a staggering $7.1 billion at the end of the second quarter. While this is down from $7.9 billion in early 2023, the pace of reduction could be significantly accelerated through a sale.

Numbers and facts

Operating metrics for the second quarter present a mixed bag. While the adjusted property EBITDA in Manila grew by 9 percent year-on-year, the site struggled with a decline in the VIP segment. Rolling-chip volume for high rollers plunged by 25 percent quarter-on-quarter, with a meager hold rate of 2 percent. In contrast, mass-market volumes remained stable. Meanwhile, in Macau, Melco faced headwinds. Revenue there fell 9 percent year-on-year to $1.05 billion. Property EBITDA in Macau dropped 26 percent to $249 million. The company's market share of Gross Gaming Revenue (GGR) in Macau slipped to 14.7 percent, a one percentage point decline from the previous year.

"Selling City of Dreams Manila could accelerate Melco’s debt reduction and allow the company to focus more resources on its core operations in Macau." - Vitaly Umansky, Senior Analyst at Seaport Research Partners

Beyond the Philippines and Macau, Cyprus offered a bright spot. Despite regional conflicts in the Middle East, EBITDA there rose 60 percent year-on-year. Nevertheless, Macau remains the focal point. To stay competitive, Melco is banking on new openings like the REM Hotel at City of Dreams Macau, scheduled for October. However, competitors are not sitting idle, investing heavily in marketing and infrastructure, which continues to squeeze margins.

Background

Melco has officially initiated a review of strategic alternatives for City of Dreams Manila. Consulting firms CBRE Capital Advisors and Moelis & Company have been engaged to advise on the process. Analysts like David Bain estimate the value of the stake at approximately $600 million. Such an influx of cash could lower the net leverage ratio to 3.5 times by late 2026. This would be a crucial milestone for resuming dividend payments to shareholders by the end of 2026. The strategic pivot could also free up capital for potential expansion into Thailand, a market currently being closely watched by major international operators.

Why it matters for German players

While the direct impact on the German market is limited, the Melco case illustrates the importance of financial stability and clear regulation for global gaming corporations. German players operate in one of the most strictly regulated environments in the world. Since the Interstate Treaty on Gambling 2021 (GlüStV 2021) came into effect, rigorous player protection rules have applied. These include a monthly deposit limit of 1,000 euros across all providers, monitored via the central LUGAS database, and a one-euro stake limit per spin on virtual slot machines.

Global corporations like Melco often focus on high-growth markets like Asia or recently Thailand, as the strict German rules significantly limit profit margins compared to the Philippines or Macau. However, German regulation by the Joint Gambling Authority of the States (GGL) provides a level of security often lacking in Asian markets. German customers should always ensure they play only with providers listed on the official GGL whitelist. Operators with licenses from Malta (MGA) or Curacao are not authorized for virtual slots and online poker in Germany and do not offer the same level of protection as domestic licensing.

What it means for GGL-licensed casinos

For operators with a GGL license, the situation at Melco highlights that focusing on the mass market can be a more stable revenue source than relying on volatile VIP segments. While the VIP business is faltering in Manila, the mass market remains a reliable pillar. GGL-licensed casinos in Germany are already focused on this mass market, as high-roller strategies are largely unfeasible due to current stake and deposit limits. The transparency and legal certainty offered by the German licensing system is a valuable asset that investors might appreciate during times of global uncertainty, even if returns per player are lower than in Macau.