Fitch Ratings Inc now expects Macau casino operator Sands China Ltd to resume dividend payments “in 2026”, it said in a Thursday note. In a previous update in July, the institution had mentioned such payments might resume in 2025.
The credit institution has upped the long-term issuer default ratings for Sands China’s parent Las Vegas Sands Corp, as well as for the Macau unit and the Singapore unit, Marina Bay Sands Pte Ltd, to investment grade, i.e., ‘BBB-‘ from ‘BB+’. The institution described the group’s rating outlook as ‘stable’.
Factors in its decision included anticipated improvement in the overall group’s earnings before interest, taxation, depreciation and amortisation (EBITDA) leverage.
That took into account assumptions there would be a common dividend issued by the parent at US$0.20 on a quarterly basis. Fitch said that was expected to cost US$600 million annually, noting there would also be “stock repurchases”, and the likely “resumption of a Sands China [dividend] distribution in 2026”. The parent company restarted payment of dividends in August last year.
Fitch said the post-pandemic recovery of business in the Macau and Singapore markets were not the only factors driving its view on the overall group’s ratings.
“Fitch believes Las Vegas Sands [group] is willing to manage its balance sheet in a manner consistent with investment grade ratings, and the company has a solid track record of publicly articulating its leverage policy and adhering to prudent balance-sheet management,” said the institution.
It added the casino group’s management had stated it aimed at a gross target debt ratio of 2.0x to 3.0x, “before the impact of development projects”.
Funding any NY project manageable
Fitch said that while it made “no assumptions” regarding the possible financial impact of the Las Vegas Sands group successfully bidding for a New York City project, “if the company receives a licence, it would be required to pay a US$500-million licensing fee up front”.
Fitch added that “given the assumption of strong free cash flow and high cash balances” in the group’s existing Macau and Singapore operations, it believed “these capital outlays are adequately financeable”.
The ratings agency stated in its latest update that its rating “reflects a strong rebound in the Macau market and outperformance in Singapore that has driven leverage metrics through Fitch’s upgrade sensitivities.”
It added: “Fitch believes the pace of recent growth in Macau should allow Las Vegas Sands [group] to continue to remain at investment grade metrics given the company’s strong position in the premium mass market, along with positive free cash flow generation and strong liquidity.”
The institution said that although the Las Vegas Sands group has a “potentially heavy capital programme, especially if it wins a New York City licence,” Fitch believed the issuer would be able to meet this funding “without materially affecting the balance sheet”.
Fitch nonetheless cautioned that the level of new rating “reflects potential weakness in the China economy, regulatory changes, and an increasingly competitive environment in Macau from new openings and expanded facilities”.
Though the ratings agency said the ‘stable’ outlook was merited by increased visitor volume and spend in Macau and Singapore. “This has led to a normalisation of operations and created abundant liquidity that protects Las Vegas Sands [group] from pockets of economic weakness,” said Fitch.
Another credit analysis house, S&P Global Ratings, had in July last year lifted Las Vegas Sands and Sands China to investment grade, i.e., ‘BBB-’ with a ‘stable’ outlook, on “Macau recovery and strong Singapore performance”, from ‘BB+’ with a ‘positive’ outlook.
