Trio of Macau casino operators hit with ‘ratings watch negative’ appraisals

Prominent credit ratings agency Fitch Ratings Incorporated has reportedly assigned a trio of firms behind some of the largest casinos in Macau with a ‘ratings watch negative’ appraisals largely due to ongoing ‘regulatory uncertainty’.

According to a report from GGRAsia, the move from the New York-headquartered firm involving SJM Holdings Limited, Las Vegas Sands Corporation and MGM Resorts International comes as the casino market in Macau is continuing to falter at the hands of the ongoing coronavirus pandemic. The source detailed that the assessment also reflects the fact that the three have yet to get their local gaming licenses renewed beyond a looming late-June cut-off.

Onerous obligations:

SJM Holdings Limited is reportedly responsible for some 20 gambling-friendly venues in Macau including the iconic Casino Grand Lisboa property and the recently-premiered Grand Lisboa Palace development. Fitch Ratings Incorporated purportedly pronounced that the Hong Kong-listed operator nevertheless ‘remains on track’ to have refinanced a range of existing loans with a new facility worth approximately $2.44 billion by the time these arrears come due in February.

Reportedly read a statement from Fitch Ratings Incorporated…

“This should leave the company with around $897.3 million of undrawn facilities after repaying existing bank loans of around $1.4 billion as of September 30, 2021, and the company’s liquidity remains strong.”

Pessimistic prediction:

In the case of Las Vegas Sands Corporation, which runs five Macau casinos via its Sands China Limited subsidiary, Fitch Ratings Incorporated reportedly advised investors that the firm’s financial profile may soon become ‘no longer consistent with an investment grade’ rating should it lose its gambling license for the former Portuguese enclave. GGRAsia explained that this New York-listed company’s current ‘BBB-’ score is the lowest within the industry’s ‘investment grade’ bracket and would likely plummet further if it was unable to secure a new concession.

Fitch Ratings Incorporated’s statement reportedly read…

“Near-term credit risk has increased with limited visibility into the re-bidding procedures, how the future regulatory and operating environment will impact cash flows and leverage and the likelihood and consequences of incumbent operators’ ability to secure a new gaming concession.”

American salvation:

When it comes to MGM Resorts International and Fitch Ratings Incorporated reportedly declared that the firm would likely retain its existing ‘BBB-’ rating past June due to the ‘essentially fully-recovered’ nature of its operations in the United States. This New York-listed company operates the 582-room MGM Macau venue as well as the even larger MGM Cotai property via its MGM China Holdings Limited subordinate and purportedly receives a comparatively smaller percentage of its annual aggregated receipts from the Macau market at about 20%.

Defensive drives:

Fitch Ratings Incorporated reportedly finished by asserting that an earlier forecast that aggregated revenues from the Macau casino market will reach 90% of their 2019 levels by the conclusion of 2023 now ‘largely hinges on a return to more normalized’ visitor volumes. However, it purportedly noted that the longer cashflows and operations remain depressed, the more the health of the aforementioned trio’s ‘credit profiles’ will hinge on ‘issuers taking offsetting actions.’