GGRAsia – Moody’s downgrades Melco Resorts Finance due to delayed recovery


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Moody’s downgrades Melco Resorts Finance due to recovery delay


Moody’s Investors Service Inc has downgraded Melco Resorts Finance Ltd’s corporate family rating and senior unsecured ratings to “Ba3”, instead of “Ba2”. The company’s outlook remains “negative,” the institution said in an announcement on Monday.

Melco Resorts Finance is a unit of casino operator Melco Resorts and Entertainment Ltd, which operates in Macau, the Philippines and the Republic of Cyprus.

“The downgrade reflects our expectation that the Melco Group’s debt levels and indebtedness indicators over the next few years will be significantly higher than pre-pandemic levels, due to the slow recovery in debt. profits amid persistent travel restrictions and significant capital spending, ”said Sean Hwang. , an assistant vice president and analyst at Moody’s, cited in the paper.

Moody’s predicts that Melco Resorts’ adjusted debt – including lease debt – will grow to around US $ 7.6 billion over the next 12 to 18 months, from US $ 6.1 billion at the end of 2020 and US $ 4.9 billion at the end of 2019.

Therefore, Moody’s expects Melco Resorts’ debt / adjusted earnings before interest, taxes, depreciation and amortization to be approximately 5.0 times to 5.5 times in 2023, which the institution says. , would be “significantly higher” than the 3.3 times recorded in 2019.

Although Mr Hwang said Moody’s view was “despite our assumption that Melco Group profits will recover significantly by 2023”.

Obligations rated “Ba” by Moody’s are considered to contain “speculative elements” and are subject to “significant credit risk”, according to the rating house. The “3” indicates a ranking at the lower end of this generic rating category.

Moody’s said Melco Resorts Finance’s ratings reflect the consolidated credit quality of its parent company, as the financial unit was “100% owned” by Melco Resorts, and the latter “is heavily dependent on Melco Resorts Finance and its affiliates. subsidiaries for profit generation and financing ”.

The rating agency said it expected “low operating profits and cash flow in 2021-2022” to lead Melco Resorts to “fund most of its capital spending with additional debt. until 2022, mainly related to its integrated hotel complex project in Cyprus and the Studio City phase. two extensions.

These were references to City of Dreams Mediterranean in Cyprus and the Studio City complex owned by Melco Resorts in Cotai, Macau.

The second phase of Studio City is expected to be ready “no later than December 2022,” company chairman and chief executive Lawrence Ho Yau Lung said in July. The expansion will increase the property’s hotel room inventory, with two new luxury hotel towers offering approximately 900 rooms and suites. There will be additional play space and non-gaming facilities, including a multi-screen cinema, restaurants, space for conferences and meetings, and an indoor-outdoor water park. The first phase of the water park was launched in May.

Moody’s said it had lowered its forecast for Macau’s mass market gross gaming revenue (GGR) in 2022, to around 60% of the 2019 level, and expected an “almost complete recovery only in 2023. “.

The institution also predicted that the city’s VIP gaming revenue in 2023 “will remain significantly below 2019 levels, given the segment’s growing regulatory oversight and the weakening of the junket industry.”



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