Moody’s Ratings has assigned a Ba3 rating to the proposed senior unsecured U.S. dollar notes to be issued by Melco Resorts Finance Ltd, with a “stable” outlook. The ratings agency said in a Monday update that it expects Melco Resorts 2024 earnings to benefit from a “strong recovery” in the Macau market.
On Monday, United States-listed casino operator Melco Resorts & Entertainment Ltd said its unit Melco Resorts Finance would conduct an international offering of senior notes.
On Tuesday, the financing arm said the US$750-million in aggregate principal amount notes would be priced at 7.625 percent, with the new notes due in 2032.
The net proceeds are to be used to make a “partial repayment of the principal amount outstanding under the revolving credit facility, together with accrued interest and associated costs,” that had been contracted by MCO Nominee One Ltd, a subsidiary of Melco Resorts Finance.
Melco Resorts Finance’s Ba3 corporate family rating “remains unchanged,” stated Moody’s.
“The Ba3 rating primarily reflects Melco Resorts & Entertainment Ltd’s established operations and high-quality assets, as well as our expectation that its financial leverage will continue to improve significantly during 2024-25,” as the Macau gaming market “maintains its strong recovery,” wrote Gloria Tsuen, a Moody’s vice president and senior credit officer.
Melco Resorts runs casinos in Macau, a property in the Philippine capital Manila, and gaming venues on the Mediterranean island of Cyprus.
Moody’s expects the continued gaming market recovery in Macau to “drive an increase” in Melco Resorts’ adjusted earnings before interest, taxation, depreciation, and amortisation (EBITDA) “to around US$1.3 billion in 2024, from US$0.9 billion in 2023”.
“Increased free cash flow will also help the company further reduce its debt and leverage,” added the ratings agency.
Melco Resorts’ adjusted debt “already decreased to around US$7.8 billion as of the end of 2023 from US$8.7 billion a year earlier,” it noted.
The institution added: “Consequently, Melco Resorts’ adjusted debt/EBITDA will improve to around 5.5x this year and further to about 4.2x in 2025, from around 8.6x in 2023, supporting Melco Resorts Finance’s Ba3 ratings.”
Moody’s expects that, “with Melco Resorts’ US$1.3 billion in cash as of the end of 2023 and operating cash flow,” the company “will have sufficient liquidity for its capital spending and debt repayments over the next 12 to 18 months”.
Melco Resorts Finance’s “proposed bond will further enhance the company’s liquidity profile,” it added.
(Updated 8.35am, April 10)
