Casino operator Melco Resorts & Entertainment Ltd’s recovery in earnings before interest, taxation, depreciation and amortisation (EBITDA) “will support deleveraging” for the group, said a Monday memo from S&P Global Ratings.
“EBITDA recovery will likely support its deleveraging to close to pre-pandemic levels over the next 12 to 24 months,” said the ratings institution. “Strong trends in Macau’s mass gaming market are fuelling this recovery,” it added.
Lawrence Ho Yau Lung, chairman and chief executive of Melco Resorts, had conceded on the firm’s call following its fourth-quarter earnings announcement last week, that the company had lost Macau market share in EBITDA terms during the year.
As well as City of Dreams, Altira Macau and Studio City (pictured) in Macau, the group also runs City of Dreams Manila in the Philippines, and City of Dreams Mediterranean in the Republic of Cyprus along with some smaller casinos there.
S&P noted in its latest opinion, which it mentioned was not a rating action: “Melco’s EBITDA recovery could accelerate in the coming quarters.”
“Solid mass gaming trends and incremental contributions from Studio City Phase 2 will likely support this,” it added.
It was referring to new hotel facilities and a premium-mass gaming space located in one of the new hotel towers, the Epic Tower, at Melco Resorts’ majority-owned Studio City in Cotai.
S&P commented: “During the recent Chinese New Year holiday, the company’s mass GGR was up 22 percent from 2019 levels, as the company benefitted from Chinese arrivals.”
The ratings agency said Melco Resorts’ property EBITDA “was also higher than 2019 levels” in that holiday period.
“Our base case assumes the company’s EBITDA will be 94 percent of 2019 levels in 2024, and 7 percent higher than 2019 levels in 2025,” stated S&P, saying that contrasted with about a 75-percent level in the fourth quarter of 2023.
During the fourth-quarter call, Mr Ho had mentioned that his company’s “number one goal continues to be debt reduction”.
Geoff Davis, the company’s chief financial officer, had said on the call that on a consolidated basis, the group “reduced debt by a total of US$950 million over the course of 2023 and we will continue to focus on debt reduction into 2024”.
The finance boss mentioned the group had repaid “another US$200 million” of its revolving credit facilities during the fourth quarter of 2023 and repurchased US$100 million of bonds at Studio City via cash tender.
According to a press release from the firm issued after the fourth-quarter results, those two payments had helped reduce group debt – net of unamortised deferred financing costs and original issue premiums – to US$7.47 billion at the end of the fourth quarter of 2023, relative to its total debt balance as of September 30.
