The risk of actual credit default by Macau casino operators is slighter than the respective risk of rating downgrade, said S&P Global Ratings, in a live Thursday online briefing, via Hong Kong.
Macau’s casinos are currently experiencing a period of zero day-to-day gaming revenue amid a week-long shutdown due to a Covid-19 outbreak in the city.
Aras Poon, an associate director of S&P Global, fielded a question during the briefing, about the risk of credit downgrades and even defaults among Macau names.
Mr Poon replied that amid the patchy recovery of the Macau market, there was a “fair chance that cash burn may continue”.
But he added, regarding a “default scenario,” that seemed “less likely in the next two years,” because debt maturities for the Macau operators were “really spread out to the long term”.
Last week, the institution cut its forecasts for Macau casino gross gaming revenue (GGR) for 2022 and 2023. It also placed several Macau operators on credit watch, with negative implications: Wynn Resorts Ltd; Las Vegas Sands Corp and Sands China Ltd; and Melco Resorts and Entertainment Ltd, and its units.
Mr Poon mentioned in Thursday’s briefing, that the watch on those groups was because of their “significant” exposure to Macau in terms of earnings before interest, taxation, depreciation and amortisation (EBITDA) and cash flow.
Las Vegas Sands announced on Monday this week, a US$1-billion parental loan to Sands China, repayable in 2028.
Mr Poon noted in S&P’s Thursday briefing regarding Macau names: “Slower recovery in Macau GGR – particularly in the mass segment – will result in greater cash burn and higher leverage at the end of 2022.”
He added this placed “greater importance” on the quality of any recovery in 2023, as it would be an opportunity for issuers “to restore their credit matrix”.
The rating agency’s base case also did not assume any “material” Macau gaming licence renewal costs or investments for the Macau operators this year or next, in relation to a new public tender process.
This was primarily due to expectation that any such material investment requirements would be spread out over a longer period, said Melissa Long, S&P Global director of gaming and cruise lines, during the presentation.
