Macau-based casino operators OK with larger debt maturities in 2025
S&P Global Ratings Inc. released a briefing stating that rated Macau casino operators anticipate better cash flow and more favorable interest rates closer to the maturity dates, which may cause them to delay refinancing plans for debt expiring in 2025.
During the discussion, Melissa Long, the director of corporate ratings at S&P Global, said that given market expectations of lower US dollar interest rates later in the year and anticipated increases in cash flow from the Macau market, operators could decide to postpone addressing the 2025 maturities.
However, Long did emphasize that in order to maintain liquidity, operators will continue to exercise caution while handling larger maturity needs in 2025 and beyond. Additionally, she suggested that investors in Macau’s gaming companies use a portion of their cash flow to partially settle these maturities and reduce the debt that was accrued during the Covid-19 pandemic.
Numerous gaming companies are covered by S&P Global, such as Studio City Co Ltd., Melco Resorts (Macau) Ltd., Sands China Ltd., Wynn Macau Ltd., and MGM China Holdings Ltd. The debt maturity profiles of these businesses are uneven, with most of their obligations due beginning in 2025.
Although the 2025 debt maturities of a few operators will become current debt in the next two quarters, S&P Global believes they have sufficient cash on hand to sustain their liquidity positions. It has long been known that businesses may use free cash flow generated in upcoming quarters to reduce debt levels prior to refinancing.
Notes due in 2024 are issued by rated issuers Wynn Macau Ltd. and MGM China. Long says they shouldn’t need to use the debt capital markets this year since they should have adequate cash and revolvers to handle those maturities.
The operating businesses of Melco Resorts & Entertainment Ltd, Melco Resorts (Macau) and Studio City Co, are now classified by S&P Global as having a positive outlook. If Melco Resorts & Entertainment can maintain its adjusted debt-to-EBITDA leverage ratio below 3.5 times by 2025, the outlook for these firms might become even better.
Due in part to an increase in the number of hotel rooms available in the market and an increase in the number of visitors to Macau, S&P Global expects these operators’ EBITDA to expand over the next few quarters. Furthermore, because of mainland authorities’ efforts to promote domestic tourism and the devaluation of Chinese yuan, Macau’s gaming business may surpass that of other Asian countries.
Original story by: GGRAsia
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