Moody’s Investors Service Inc says it expects casino operators MGM Resorts International and Wynn Resorts Ltd to pursue new “large, high profile” development opportunities “around the world,” which would require “significant” investment and debt. The comments were part of updates published on Wednesday on credit issuers linked to companies with operations in Macau.
The ratings agency said it expected MGM Resorts to “actively pursue other large integrated resort [IR] development projects (e.g., Japan) that would require significant equity investment and debt to finance construction and will continue to expand its domestic operations.”
MGM Resorts and its local partner Orix remain the only qualified consortium in the request-for-proposal (RFP) process of Japan’s Osaka prefecture, concerning the metropolis’ tilt at having a casino resort.
MGM Resorts is the parent of Macau casino operator MGM China Holdings Ltd.
In Wednesday’s announcement, Moody’s said MGM Resorts’ “Ba3” corporate family rating reflected the group’s “meaningful earnings weakness expected from efforts to contain the coronavirus and the slow recovery in volume now that properties have reopened”.
According to Moody’s definitions, “Ba” credit obligations have “speculative elements and are subject to substantial credit risk”.
The ratings house suggested MGM Resorts was “constrained by its concentration” in the Las Vegas, Nevada market in the United States.
In the Macau market, where MGM China runs MGM Macau on the city’s peninsula, and MGM Cotai (pictured), there was some “volatility” of demand and dependence on inbound travel rather than a locals market, with such demand “curtailed” during the pandemic.
“As a result of a slow expected recovery in Las Vegas and Macau, MGM is weakly positioned at the Ba3 level, as leverage is expected to remain elevated for at least the next year,” stated Moody’s.
Regarding Wynn Resorts, the United States-based parent of Macau casino licensee Wynn Macau Ltd, Moody’s said it also expected the group to be “presented with and pursue other large, high profile, integrated resort development opportunities around the world.” The rating agency did not elaborate on what other markets could be of interest to Wynn Resorts.
But it added: “There will likely be periods where the company’s leverage experiences periods of increases due to partially debt-financed, future development projects.”
Moody’s said additionally that Wynn Resorts Finance LLC’s “Ba3” corporate family rating reflected the “meaningful earnings declines from efforts to contain the coronavirus and the potential for a slow recovery now that properties have reopened.”
Moody’s nonetheless said Wynn finance unit’s rating was “supported by the quality, popularity, and favourable reputation of the company’s resort properties.”
Moody’s also gave an update on Las Vegas Sands Corp, the U.S.-based parent of Macau operator Sands China Ltd, and of the promoter of Singapore casino complex Marina Bay Sands. The parent company has a “Baa3” senior unsecured rating, according to Moody’s.
That indicated “moderate” credit risk, involving “medium-grade” obligations that “may possess speculative characteristics”.
Las Vegas Sands’ rating was “supported by the high quality, popularity, and favourable reputation of all its casino properties,” stated the rating agency.
The ratings house further observed that the company’s strong balance sheet and the “suspension of its dividend” amid the disruption of the pandemic, “supports the company’s liquidity and demonstrates a willingness to preserve capital during weaker operational periods”.
Moody’s said however that the likelihood that Las Vegas Sands would “continue to return large amounts of capital to shareholders” in the form of dividends and “possibly share repurchases” when operations normalise were a constraint to the group’s rating.
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