Fitch Ratings Inc says it expects Macau’s gross gaming revenue (GGR) to recover to 2019 levels, i.e., those before the onset of the Covid-19 pandemic, by 2024. Such a scenario “may prove conservative given current trends,” said the institution in a Tuesday report.
The report focused on U.S.-based casino operator MGM Resorts International, and was issued following the company’s announcement last week that it had reached an agreement to acquire, for nearly US$2.13 billion, the remaining 50 percent stake in CityCenter, in Las Vegas, Nevada.
Once the deal is finalised, MGM Resorts is to sell CityCenter to funds under private equity management firm The Blackstone Group, for US$3.89 billion in cash, and lease back the Aria Resort and Casino and Vdara Hotel and Spa within the complex.
MGM Resorts is the parent of Macau casino firm MGM China Holdings Ltd. MGM China runs the MGM Macau on the city’s peninsula, and MGM Cotai, in the newer casino-focused district.
In Tuesday’s report, Fitch affirmed MGM Resorts’ issuer default rating at ‘BB-’, a non-investment grade, and gave it a negative outlook.
“The affirmation reflects Fitch’s expectation that gross consolidated leverage will decline to six times (the negative rating sensitivity) by 2023 (i.e. within the rating horizon) pro forma for the announced transactions as well as Fitch’s more positive view on Las Vegas’ recovery to pre-pandemic levels,” stated the ratings agency. “Fitch expects net consolidated adjusted leverage will be about two times lower than gross given MGM’s significant excess cash balances.”
The institution however said the negative outlook reflected the “risks and uncertainty the global gaming industry is facing from the coronavirus pandemic, particularly jurisdictions that rely on international visitation.”
Fitch’s assumptions include a full recovery to 2019 levels for U.S. regional gaming markets, Las Vegas and Macau by 2022, 2023 and 2024, respectively.
Aggregate casino GGR in Macau in the six months to June 30 this year stood at MOP49.02 billion (US$6.13 billion), an increase of 45.4 percent from the prior-year period. The result was down 67.2 percent from the first six months of 2019.
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