A ratings agency says three Macau casino operators each with a United States-based majority owner have for now “no pressure” to resume payment of dividends to their parent entity. Macau casino-sector dividend programmes were curtailed during the Covid-19 pandemic, amid tighter trading conditions.
S&P Global Ratings Inc said in a Tuesday webinar by some of its analysts covering the sector that 2024 looked a more likely scenario for such dividends, but stressed that neither U.S.-based Wynn Resorts Ltd, MGM Resorts International, nor Las Vegas Sands Corp were talking about the dividend topic currently.
Sands China Ltd affirmed recently it has conditions from lenders concerning its ability to issue dividends. They relate to permitted consolidated leverage ratio, and could still be applicable up to the start of 2025.
S&P Global said in its Tuesday briefing that all three U.S. casino brands under discussion still had sufficient liquidity to support their investment plans for markets outside Macau. The firms are linked respectively to Macau casino businesses Wynn Macau Ltd, MGM China Holdings Ltd, and Sands China.
S&P director of corporate ratings Melissa Long and associate director of corporate ratings Aras Poon led the briefing.
The relevant U.S. companies should still have “healthy cash flow” generated outside Macau and for opportunities beyond China’s only legal casino destination, remarked Ms Long.
She cited examples of outside investments or investment opportunities as: “[Las Vegas] Sands with New York and Singapore; MGM [Resorts] with Japan and New York; and Wynn [Resorts], in addition to the New York casino possibility… got an expansion in Boston [Massachusetts] and is pursuing an integrated resort development in the UAE.”
Those were references, respectively, to the possibility of a downstate New York licence competition that might involve all three brands; Las Vegas Sands’ expansion commitments for its Marina Bay Sands resort in Singapore; MGM Resorts’ involvement in a casino resort scheme for Osaka, Japan; and Wynn Resorts’ expansion of its Encore Boston Harbor property in Massachusetts. The latter group also has a commitment to invest in – alongside local partners – and manage, a US$3.9-billion casino complex in Ras Al Khaimah in the United Arab Emirates (UAE).
In February last year, Las Vegas Sands affirmed completion of a US$6.25-billion sale of The Venetian Resort in Las Vegas, Nevada, in the U.S., and continues to generate cash from its Singapore operation. For the others, early recovery of U.S. domestic casino markets relative to the length of time it took China and Macau to open up, had provided “healthy cash generation,” stated Ms Long.
Operations still ramping
“We don’t really see any pressure or need to upstream dividends from Macau to [the U.S.] parent companies,” she noted. “In fact, we’ve made some assumptions around potential future dividend resuming in 2024, assuming cash flow recovers in line with our base case forecasts. But that’s an assumption that we’re making and none of the operators have spoken about resuming dividends…from Macau,” Ms Long said.
The S&P Global director said she believed the U.S. companies are currently “more focused on cash flow recovery, credit measure improvement and capital spending needs in Macau”, before focusing on the dividend issue.
All six Macau operators had to pledge fresh capital investment in the Macau market as a condition of each getting a new 10-year gaming concession that started in January.
Last week S&P Global adjusted upward its forecast for recovery to 2019 levels for Macau’s mass-market and VIP gross gaming revenue (GGR). The update reflected Macau’s faster-than-expected comeback, driven by premium mass play, mentioned Mr Poon during the webinar.
The three casino brands, as well as Melco Resorts and Entertainment Ltd, could respectively restore their credit metrics to circa 2019 levels by 2025, S&P Global mentioned in data highlighted during the webinar. The institution said over 90 percent of those rated issuers’ Macau-related maturities were due only in 2025 or beyond.
Mr Poon said his institution did not expect “a lot of refinancing” to happen for those gaming names this year or next. Need for any such action was “low” for now, and the capital-market cost “too high”.
“We believe issuers… take a more ‘wait’ approach until… the Macau market recovers to a even better stage and for the potential cost” of refinancing to come down, said Mr Poon during the webinar.
