S&P revises Wynn Resorts’ outlook to negative
Standard & Poor’s Global Ratings revised on Tuesday its outlook on Las Vegas-based Wynn Resorts Ltd and its subsidiaries – including its Macau unit – to “negative” from “stable”. The ratings agency said the negative outlook reflects the “significant uncertainty” over the resolution of various investigations into the allegations of misconduct made against the founder and chairman-cum-chief executive of Wynn Resorts, Steve Wynn.
Wynn Resorts – with gaming operations in Las Vegas, Nevada – is the parent company of Macau-based casino operator Wynn Macau Ltd. Mr Wynn is also chairman and chief executive of Wynn Macau Ltd.
The misconduct allegations against Mr Wynn “could impair the company’s brand and ability to maintain or review its gaming licences,” the ratings agency noted in its research update. Standard & Poor’s has also affirmed its ratings on Wynn Resorts and its subsidiaries, including the “BB-minus” corporate credit ratings.
“The negative outlook also reflects our limited transparency into potential succession plans in the event that Steve Wynn is forced to resign as CEO, whether his departure would include monetary compensation or a buy-out of his ownership in the company, and potential rebranding risks if the company elected to discontinue using the Wynn brand,” the ratings agency wrote.
The Nevada Gaming Control Board launched a formal investigation into allegations of sexual misconduct made against Mr Wynn, a move that followed a report last week by the Wall Street Journal detailing the allegations made by former Wynn Resorts employees. Mr Wynn has denied the allegations featured in the article.
The Macau regulator – the Gaming Inspection and Coordination Bureau, a body also known by its Portuguese acronym DICJ – met on Monday with representatives from Wynn Macau Ltd “better to understand the situation” regarding the allegations against Mr Wynn.
The Massachusetts Gaming Commission announced on Friday it would independently investigate the allegations raised in the Wall Street Journal article. Wynn Resorts is developing a casino property in Boston, in the U.S. state of Massachusetts.
Wynn Resorts also announced on Friday it would form a special committee consisting solely of independent directors to investigate the claims against Mr Wynn.
“Given Steve Wynn’s intimate involvement in design, branding, and marketing, this could impair the company’s ability to maintain or renew gaming licences and weaken its ability to secure licences in new jurisdictions,” Standard & Poor’s wrote in its Tuesday report.
It added: “We believe reputational damage has the potential to hurt cash flows (especially in Las Vegas) through reduced visitation and spending at the properties.”
But the ratings agency also highlighted that the Macau operation of Wynn Resorts could be “less sensitive” to the allegations made against Mr Wynn.
“We believe visitation to and cash flow generation at Wynn’s resorts in Macau, which constitute about two-thirds of total [group] EBITDA [earnings before interest, taxation, depreciation and amortisation], will be less sensitive to the allegations… the magnitude of the cultural conversation occurring around these types of incidents in China are less impactful than those occurring in the U.S.,” stated the report.
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