Moody’s Investors Service Inc has placed on review for downgrade Macau casino licensee SJM Holdings Ltd’s ‘Ba1’ corporate family rating, and a ‘Ba2’ backed senior unsecured rating on notes issued by Champion Path Holdings Ltd and guaranteed by SJM Holdings.
The rating outlooks were ‘negative’ prior to the review for downgrade, stated the institution in a Monday memo.
Moody’s Ba1 and Ba2 ratings indicate a ‘speculative grade’ of investment, with “speculative elements”, according to the firm’s guide to its rankings.
“The review of the ratings for downgrade mainly reflects SJM’s delay in refinancing its existing bank loans, which will mature at the end of February 2022,” said commentary from Sean Hwang, a Moody’s assistant vice president and analyst.
He added: “A downgrade of multiple notches may occur if the delay persists.”
“While SJM’s solid credit quality and long-standing banking relationships support its ability to raise necessary funds, its funding plan is subject to certain regulatory processes and capital market uncertainties,” added Mr Hwang.
SJM Holdings opened its HKD39-billion (US$5-billion) Grand Lisboa Palace casino resort on Cotai on July 30, against the backdrop of the ongoing pandemic.
Soon after launch, Macau had two Covid-19 alerts relating to confirmation locally of new cases, and that led to a temporary tightening of travel rules, coinciding with a sharp fall off in tourism numbers from mainland China to Macau.
Moody’s said in its Monday memo that SJM Holdings had started the process of refinancing its February-2022 maturity secured bank facilities, at the beginning of this year.
The ratings institution noted that during the first half, SJM Holdings raised US$1.2 billion of unsecured bonds, and as of the end of June reduced to HKD9 billion, from HKD19 billion, the balance of its existing facilities.
“SJM is seeking to refinance the remaining balance with new syndicated bank facilities,” stated Moody’s.
“However, the execution of such facilities is subject to certain regulatory processes, in Moody’s understanding, which can be time-consuming and unpredictable at times,” added the rating’s house, without elaborating further on the nature of those processes.
Any “unforeseen event” of a further delay or failure in completing the necessary processes over the next two to three months would “force SJM to turn to alternative funding channels, such as bond issuance, with limited buffer against the upcoming maturity,” suggested Moody’s.
“This situation would expose SJM to uncertain capital-market conditions that are outside the company’s control,” added the institution.
But Moody’s said the casino group’s established track record of gaming operations and quality assets in Macau, and its long-standing banking relationships, “will aid in securing sufficient bank facilities or bond proceeds for the refinancing”.
