Deutsche Bank (DB) Securities Inc thinks lender conditions on debt held either by United States-based casino group Wynn Resorts Ltd or its Macau-operations arm Wynn Macau Ltd should not be a concern during the current coronavirus pandemic and the huge disruption to the industry.
“We do not believe covenants will be an issue in Macau or domestically, given the flexibility/optionality provided by the covenants,” wrote analysts Carlo Santarelli and Steven Pizzella in a Thursday note.
Wynn Macau Ltd runs the Wynn Macau resort (pictured) in downtown Macau, and Wynn Palace in the city’s Cotai district.
Mr Santarelli and Mr Pizzella added: “We think the recent decision from Wynn Macau [Ltd] to suspend the dividend implies… [a] Wynn [Resorts] dividend for the second quarter 2020 is unlikely, and we would anticipate a potential special dividend over the medium term, should [trading] conditions begin to firm.”
While the Macau market’s casinos are still open, March casino gross gaming revenue (GGR) fell 79.7 percent year-on-year, coinciding with a raft of travel restrictions which have seen daily visitor numbers almost dry up – down to just a few hundred arrivals in recent days. The city had only approximately 360 visitors entering on Thursday, according to Macau’s Public Security Police.
A Wednesday note from JP Morgan Securities (Asia-Pacific) Ltd said the Macau market’s GGR for April might turn out to be close to “zero”.
It emerged also on Wednesday that the governor in the U.S. state and casino gambling hub of Nevada – the largest single commercial casino gaming market in the United States by gross gaming revenue – had ordered that the temporary closure of casinos in the state caused by Covid-19, due to expire on April 15, be extended to April 30. The parent companies of three Macau casino operators – MGM China Holdings Ltd; Sands China Ltd; and Wynn Macau Ltd – are based in Nevada.
Wynn Resorts said in its full-year 2019 results released on February 6 that as of December 31 the group held on a global basis, current and long-term debt outstanding amounting to US$10.4 billion. This included US$4.96 billion of Macau-related debt, inclusive of a US$1.0-billion Wynn Macau term loan to be repaid in connection with the issuance of some 2029 Wynn Macau Ltd notes.
Brokerage Sanford C. Bernstein Ltd had said in a Thursday note on the Macau operators and their debt commitments, that Wynn Macau Ltd had “cash on hand to run for 17 months assuming worst-case scenario of no revenues”.
It added also that under such a worst-case setting, it estimated the daily “cash burn” of Wynn Macau Ltd at HKD24.6 million (nearly US$3.2 million).
“As with Sands [China], and MGM [China], we believe Wynn [Macau] will get covenant waivers with respect to its credit facility along with deferral of term-loan repayment requirements,” said Sanford Bernstein’s analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu.
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