The market-consensus ‘negative’ rating outlook on credit instruments currently applicable to Macau gaming firms could be lifted this year, against the backdrop of the Macau casino market recovery seen since January, says Bloomberg Intelligence.
There might be debt market tapping from the second quarter for some Macau-linked names, the organisation stated.
“The better-than-expected Lunar New Year visit numbers might lead to positive earnings revisions, which could lead to faster-than-expected restoration of credit metrics,” said Cecilia Chan, credit analyst at Bloomberg Intelligence, in a Monday podcast.
“We now expect the leverage of most gaming issuers could fall to below their respective downgrade thresholds, from the end of 2023, which means there is a chance that the ‘negative’ rating outlook would be lifted,” she added.
For the podcast, Bloomberg Intelligence compiled information by credit rating agencies Moody’s Investors Service Inc, S&P Global Ratings Inc, and Fitch Ratings Inc. The gathered data covered a number of Macau gaming firms: Sands China Ltd, Melco Resorts and Entertainment Ltd, MGM China Holdings Ltd, Wynn Macau Ltd, and SJM Holdings Ltd. Each had a ‘negative’ rating outlook assessment from at least two of the mentioned credit agencies.
Macau-operator credit outlooks – and the cost of more recent borrowing for some – had been affected by factors including successive quarters of negative earnings before interest, taxation, depreciation and amortisation (EBITDA).
But the Macau-linked issuers might achieve EBITDA break-even “as soon as the first quarter” this year, said Bloomberg Intelligence.
“We think the primary U.S. dollar market for Macau gaming issuers might restart from 2023 even though they actually faced limited debt maturities this year,” stated Ms Chan.
She added: “So with improving industry fundamental and market sentiment toward the Macau gaming sector, we expect we will see more debt market tapping from the second quarter. This could lead to repricing of the existing bonds curve.”
Angela Hanlee, Bloomberg Intelligence senior gaming and hospitality analyst, said on the same podcast: “We now expect Macau’s gross gaming revenue this year to reach 52 percent of pre-pandemic levels, from our previous forecast of 42 percent.”
“This is also higher than the current market consensus and the change is mainly due to the fast reopening of mainland China,” the analyst further noted.
She cautioned February was likely to see a “slower recovery” than January relative to “2019 readings,” because the Lunar New Year holiday in 2019 took place during February.
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