GGRAsia – Draft law a credit plus for Macau linked firms: Moody’s

Draft law a credit plus for Macau linked firms: Moody’s

Jan 20, 2022 Newsdesk Latest News, Macau, Top of the deck

The tabling of Macau’s draft bill to amend its gaming law framework is “credit positive” for Macau gaming-linked companies, suggests a Wednesday report from Moody’s Investors Service Inc.

The ratings house said this is because the bill “removes significant regulatory uncertainties” over the “extension” of the six existing licences, that are due to expire on June 26 this year, and removes “uncertainties concerning substantially-tighter regulations being imposed on the city’s six gaming concessionaires”.

The bill is due to undergo a first reading and first vote in Macau’s Legislative Assembly on Monday (January 24).

“We continue to expect Macau’s six gaming operators to renew their concessions,” stated Moody’s. “Non-renewal of any of the concessions would pose substantial risk to government finances and economic stability in Macau because of the significant amount of employment the industry generates,” it added.

Moody’s observed that a proposal made in a public consultation paper in September – that gaming operators would need to seek pre-approval from the Macau government before paying dividends to investors – did not appear in the draft bill.

“Tighter restrictions on dividends would have reduced the financial flexibility of companies that rely on subsidiary dividends to service debt and interest payments,” stated the ratings institution.

Moody’s stated that as a result of a resurgence of Covid-19 and travel restrictions, “a substantial recovery” in the Macau mass market would in likelihood “happen only in 2023”, and that the six gaming firms’ “operating performance in Macau will remain sluggish at least over the next few quarters”.

In a November note, Moody’s said in a note downgrading Melco Resorts Finance, part of Melco Resorts and Entertainment Ltd, that it forecast the latter company’s adjusted debt – including lease liabilities – would increase to around US$7.6 billion over the following 12 to 18 months, from US$6.1 billion as of the end of 2020.

Melco Resorts is currently committed to spending US$1.3 billion on phase two of its majority-owned Studio City casino resort in Macau’s Cotai district.

Hong Kong-listed MGM China Holdings Ltd, which opened MGM Cotai in early 2018, had net debt amounting to nearly HKD20.18 billion (US$2.59 billion) as of June 30, up from nearly HKD18.52 billion as of December 31, 2020, according to its interim report issued in September.

Sands China Ltd, also on the Hong Kong bourse, had net debt of US$6.55 billion as of June 30, up from US$6.04 billion as of December 31, 2020, it said in its interim report filed in Hong Kong in August.

SJM Holdings Ltd, which launched its HKD39-billion Grand Lisboa Palace resort in Cotai in July, had just under HKD20.41 billion in debt as at September 30.

Wynn Resorts Ltd, the parent of Wynn Macau Ltd, had US$5.77 billion of Macau-related debt as of the end of the third quarter.