The fact a Macau casino operator has been able to issue debt with a maturity close to the 2032 expiry of the current Macau industry concessions, could be a positive indicator for the incumbents for the next round of casino concessions, says CBRE Credit Research.
In a Wednesday note on recent financing steps by the Melco group, CBRE analysts Colin Mansfield and Connor Parks wrote: “Issuing debt with a maturity less than one-year inside the current concessions’ expiration is promising as some precedent now exists for how the Macau government approaches the rebidding process.”
The commentary referred to Melco Resorts Finance Ltd, the financing unit of Melco Resorts & Entertainment Ltd, recently issuing US$750 million of 7.625-percent unsecured notes due in 2032.
The Melco group had said proceeds were being used to pay down amounts outstanding under the MCO Nominee One Ltd revolving credit facility. The latter is a Melco Resorts subsidiary.
“We view the balance sheet moves favourably as it reduces near-term maturities, increases financial flexibility and further executes on management’s commitment to debt reduction,” stated the CBRE analysts.
Moody’s Ratings assigned a ‘Ba3’ rating to the planned U.S. dollar notes from Melco Resorts Finance, with a “stable” outlook.
Lawrence Ho Yau Lung, chairman and chief executive of Melco Resorts, said on a call with investment analysts in late February that his company’s “number one goal continues to be debt reduction”.
CBRE said in its memo: “Melco Resorts Finance’s financial flexibility improves with the US$750-million issuance, and we estimate circa US$1.75 billion is available under the MCO Nominee revolver on a pro forma basis.”
It added: “Melco Resorts Finance still has US$1.0 billion in June 2025 maturities to address, but given its low coupon we expect this to be taken closer to maturity.”
The institution also gave some commentary on Studio City Finance Ltd, the financing unit for the majority Melco-owned Studio City casino resort in the Cotai district of Macau.
Studio City Finance had recently announced a US$100-million cash tender offer for its 6-percent unsecured notes due 2025, “which will have approximately US$300 million outstanding on a pro forma basis, further improving leverage,” noted CBRE.
