Moody’s Investors Service Inc. has given Melco Resorts Finance Ltd and Studio City Finance Ltd a “stable” outlook. The comments reflect the agency’s view that each financial institution related to the Melco casino brand will continue to recover Macau’s earnings and improve its financial leverage over the next 12 to 18 months.
However, Moody’s anticipated Studio City Finance is linked to the Studio City Casino complex in Macau’s Kotai region, where Melco Resorts is the majority owner, and will not pay dividends for at least “the next year or two,” as it still has high leverage after acquiring debt financing to support capital spending after the COVID-19 pandemic. However, the agency acknowledged Studio City Finance “has never paid dividends in its history.”
In an update on Wednesday, Moody’s noted that Melco Resorts Finance, which is 100% owned by Melco Resorts & Entertainment Ltd, which operates casinos in Macau, the Philippines and the Republic of Cyprus, has been rated as a “Ba3” corporate family.
“Melco Resort & Entertainment’s adjusted debt/EBITDA [earnings before interest, taxation, depreciation and amortization] will improve from 8.6 to 5.2 to 6.2 times over the next 12 to 18 months,” Moody’s said in a forecast.
This is because “the recovery of the Macau gaming market after China’s reopening in early 2023 will lead to higher revenue and lower debt.”
“Expected leverage supports Melco Resorts Finance’s Ba3 rating,” the rating agency added. 바카라사이트
Moody’s anticipated continued improvement in EBITDA, adjusted for Melco Resorts parent company, this year and next, as the mix in the Macau market shifts to the premium mass and direct VIP gaming segments.
“We expect the Company’s [Melco Resorts] Adjusted EBITDA to further improve from US$9 in 2023 to US$1.2 billion in 2024 and US$1.3 billion in 2025. Pre-pandemic levels in 2019 were US$1.5 billion,” the appraiser noted.
Moody’s also noted that Melco Resorts had “very good” liquidity, with $1.1 billion in cash on hand as of the end of June, excluding limited cash. It also had $1.9 billion through its revolving credit facility as of the day, according to a commentary on the second-quarter earnings call from the casino group’s chief financial officer, Geoff Davis.
“These liquidity sources will be sufficient to cover Melco Resorts & Entertainment’s cash demand for at least the next 18 months,” Moody’s observed
The company extended the maturity of its $1.92 billion credit facility by two years from April 2025 to April 2027, Moody’s said, adding that it issued $750 million in eight-year bonds in April to fully resolve Melco Resort Finance’s debt maturity by the end of 2025.