Bank of America Expects Melco to Resume Dividends Earlier Than Expected

According to Bank of America’s investment arm, Melco, a Macau gambling operator, is set to start paying dividends in fiscal year 2025—one year earlier than anticipated.

Based on Melco’s recent financing efforts aimed at strengthening its capital structure and liquidity position, as per the most recent investment letter from Bank of America Securities, this projection has been made.

In addition to extending the revolver credit facility’s expiration date to 2027, Melco issued eight-year, $750 million senior notes at a 7.625 percent interest rate, which was noted in the investment letter.

A tender to purchase senior notes due in 2025 for up to $100 million has been announced by Studio City, a subsidiary of Melco.

Bank of America Securities anticipates that the refinancing will significantly improve Melco’s maturities, even though the senior notes’ coupon rate is greater than the rate on bank loans.

With the assumption that the revenues from the senior notes are used to pay back credit facilities, Melco’s debt due in 2025 should decrease from $2.4 billion as of December of last year to $1.29 billion.

Additionally, the brokerage projects that after loan facilities are repaid, the amount of unused revolver would rise sharply to $1.7 billion, providing Melco with more flexibility and liquidity.

Although Melco’s market share in 1Q24 increased by 2% on a quarter-over-quarter basis (to 14.6 percent), Bank of America Securities anticipates a slight gain in market share in the second half of 2024.

Analysts note that Melco’s goal of enhancing customer service, especially in the premium mass category, could be a catalyst for future growth, but they also warn that this might not translate into higher gross gaming revenue (GGR) right once.

Original Story by: Asian Gaming Brief