Moody’s Ratings has affirmed the ‘Ba3’ corporate family rating of Macau casino concessionaire SJM Holdings Ltd, but changed the firm’s rating outlook to ‘negative’ from ‘stable’.
“The change of outlook to negative reflects a high likelihood that SJM’s financial leverage will remain elevated over the next 12 to 18 months, given its weaker-than-expected results in the first six months of 2025,” said Stephanie Lau, a Moody’s Ratings vice president and senior credit officer, in a memo issued on Monday.
The Macau casino operator reported group-wide revenue of nearly HKD14.64 billion (US$1.88 billion) for the first six months this year, up 6.1 percent from a year earlier.
The company posted a first-half 2025 loss of HKD182.2 million, and saw its adjusted earnings before interest, taxation, depreciation, and amortisation (EBITDA) fall by 5.1 percent year-on-year, to just under HKD1.65 billion.
Ms Lau said in Monday’s report: “While we expect visible improvements in both earnings and financial leverage in 2026, it is uncertain if adjusted debt/EBITDA can fall to 5.5 times or below from the current 7.4 times.”
Moody’s said that without assuming any acquisitions of satellite casino properties in Macau, it expects SJM Holdings’ debt to EBITDA ratio “to stay high at 7.3 times in 2025, similar to 7.4 times for the 12 months ended 30 June 2025”.
“This higher-than-expected leverage in 2025 primarily reflects a 5-percent decline in adjusted EBITDA in first-half 2025 from a year ago,” stated the rating agency.
It added: “Weaker earnings were driven by high operating expenses and exceptionally low win rates. With an expected recovery through normalised win rates in second-half 2025, we assume its adjusted EBITDA in 2025 will be similar to the level in 2024.”
Covenant waivers
Moody’s also expects the casino firm’s debt level at the end of 2025 to be “moderately higher” than the level at the end of 2024.
SJM Holdings’ adjusted debt to EBITDA ratio will in likelihood “improve visibly to about 5.7 times in 2026, driven by about 15 percent to 20 percent increase in EBITDA and a modest debt reduction,” noted Moody’s.
According to the institution, the company’s “higher earnings will be mainly supported by the reallocation of satellite casino tables to SJM’s existing self-owned properties”.
“Other contributing factors include continued moderate growth in gaming revenue, a further ramp-up of Grand Lisboa Palace, and a normalisation of the win rates,” it added.
In June, SJM Holdings said it will cease operating seven of its current nine satellite casinos this year, with one shuttered at the end of July. Only Ponte 16 and L’Arc Macau are expected to continue operations beyond 2025, with the SJM group having previously announced plans for them to become part of the group’s portfolio of self-promoted operations.
As part of the process, the casino operator is acquiring a portion of Hotel Lisboa, in downtown Macau, from its parent, Sociedade de Turismo e Diversões de Macau SA (STDM). The deal involves a total consideration of HKD529 million.
While Moody’s anticipates SJM Holdings’ projected 2026 leverage to “trend toward” the required Ba3 threshold, it cautioned that “there is uncertainty around customer retention or the extent of earnings generation from the satellite table reallocation, and the likelihood of higher debt incurrence to fund satellite casino acquisitions”.
The rating agency also said SJM Holdings’ liquidity was “adequate”.
“Its cash holdings – excluding restricted cash – of HKD2.1 billion, and its available revolving credit facility, will be more than sufficient to cover its cash needs and maturing debt over the next 12 to 18 months,” suggested Moody’s.
It added: “The company will need to secure waivers for a likely breach of financial covenants in the coming few quarters to maintain funding lines’ access, though we do not expect difficulty in obtaining them.”
