Moody’s Investors Service Inc has upgraded the corporate family rating of casino operator Las Vegas Sands Corp to Ba1 from Ba2. Both ratings are considered ‘investment grade’. The credit ratings agency also indicated a decline in probability of default by the firm, upgrading its rating in that regard by one notch, to Ba1-PD from Ba2-PD.
“The upgrade considers Moody’s view that Las Vegas Sands’ assets in Singapore and the U.S. will provide the company with the ability to maintain its very strong credit and liquidity profile despite the expectation of continued weakness and increased competition in Macau, a considerable amount of planned capital expenditures, and a large amount of regular cash dividend payments,” Keith Foley, a senior vice president at Moody’s, stated in a release on Tuesday.
Moody’s highlighted the fact that Las Vegas Sands – via subsidiary Marina Bay Sands Pte Ltd – owns and operates Marina Bay Sands (pictured), one of only two casino resorts authorised to operate in Singapore. According to Moody’s, the casino resort has margins on property-level earnings before interest, taxation, depreciation and amortisation (EBITDA) in excess of 50 percent.
Another credit ratings agency, Fitch Ratings Inc, said in a note earlier this month the Singapore government was “unlikely” to grant licences to set up new casinos post-2017, when the exclusivity period of the current two licences expires. Fitch stated as reasons the “potentially higher frequency of problem gaming with the local population, and the muted outlook for the inbound tourism sector in Singapore”.
Las Vegas Sands has a strong footprint in Macau too, where it is the largest operator by floor area in the Cotai district, via its subsidiary Sands China Ltd. It opened there last week the St Regis Macao, Cotai Central. The 400-room hotel, part of a brand owned by Starwood Hotels and Resorts, is the fourth and final hotel tower of the Sands Cotai Central property. The St Regis Macao tower did not add new gaming facilities to Sands Cotai Central.
Macau’s casino sector has, up to November 30, seen 18th straight months of gross gaming revenue retreat measured year-on-year. But Las Vegas Sands chairman Sheldon Adelson said last week that he expected a turnaround to take place next year.
Las Vegas Sands also owns and operates casino properties in Las Vegas, Nevada, and Bethlehem, Pennsylvania, both in the United States.
The company reported consolidated net revenue of about US$13.5 billion for the 12-month period ended September 30.
Moody’s stated that Las Vegas Sands’ Ba1 corporate family rating reflected the company’s “strong consolidated performance, very strong credit metrics, and the quality, popularity and favourable reputation of all its casino properties – a factor that continues to distinguish the company from most other gaming operators.”
The credit ratings agency said it expected Las Vegas Sands’ debt-to-EBITDA ratio to remain at or below 3.0 times.
The estimate by Moody’s included an assumption of about US$2.5 billion of capital spending in 2016 and 2017 combined, a significant portion of which related to the company’s The Parisian Macao development, in Cotai, which Las Vegas Sands says is due to open in the second half of 2016.
It also assumed Las Vegas Sands would continue to pay regular cash dividends, in the next two years combined, of around US$5 billion, and still end up with about US$1 billion of consolidated cash on its balance sheet by the end of 2017.
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"I am not going to speculate on what the [casino licence refreshment] tender requirements would be. I have full confidence and faith in the Macau government to treat everyone fairly"
Wilfred Wong Ying Wai
President and chief operating officer of Macau-based casino operator Sands China