Moody’s Investors Service said the amendments of certain covenants on Studio City’s US$1.4 billion secured loan “are credit positive” for Studio City Finance Ltd.
“However, there is no immediate impact on Studio City Finance’s B2 corporate family rating, B3 senior unsecured rating, as well as negative outlook,” the ratings house said in a statement on Monday.
Studio City Finance has developed and operates – via one of its units – the Studio City project, a new US$3.2-billion casino resort (pictured) in Macau that opened on October 27.
Moody’s on November 2 revised to “negative” from “stable” the outlook of Studio City Finance’s B2 corporate family rating and B3 senior unsecured rating.
Casino operator Melco Crown Entertainment Ltd – 60 percent owner of the Studio City project – on November 18 announced that one of its units had reached an agreement to amend the documentation related to a US$1.4 billion project loan for the resort.
The amendments included “changing the Studio City project opening date condition from 400 to 250 [gaming] tables, consequential adjustments to the financial covenants, and rescheduling the commencement of financial covenant testing,” said Melco Crown.
“The amendment to lower the required number of gaming tables is credit positive because it has alleviated the risk of covenant breach and immediate repayment of the US$1.4 billion credit facilities,” Kaven Tsang, a Moody’s vice president and senior credit officer, said in Monday’s statement.
“The amendments to the financial covenants and the rescheduling of the testing dates will also reduce the risk of non-compliance in the near-term, as the initial operation of the Studio City project will likely stay weak, given the challenging operating environment in Macau’s gaming sector,” added Mr Tsang.
The ratings house said it believed Studio City Finance would benefit from operational support from Melco Crown, which would help Studio City Finance manage its risks during the ramp-up phase of the Cotai project.
Moody’s said however that Studio City Finance’s ratings outlook remains negative, “reflecting an expectation of weak cash flow generation for its Studio City project in the next 12-18 months, which will continue to pressure its liquidity and delay its deleveraging”.
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“Amendment to the gaming law is still a work in progress ... We need to wait for further details, in terms of the finer form that the amendments will take, and there will be additional regulatory measures that will be potentially issued thereafter”
Chief operating officer of Sands China