S&P Forecasts Dismal 2022 GGR Tally in Macau, Could Cut Credit Ratings on Three Operators

Amid a recent surge inwards coronavirus cases, Macau casinos are hardly open, and some are existence used as quarantine zones. That’s prompting ane ratings agency to government issue a cutting 2022 144 gaming revenue (GGR) calculate for the special administrative neighborhood (SAR).

In a young report, S&P Global Ratings says the topper slip scenario for Macau’s GGR this yr is $1.08 billion, or just now 20% to 30% of 2019 levels.

Putting that enter into context, it’s roughly an ordinary month of gaming revenue inward Nevada. With that dour outlook, S&P also places the deferred payment ratings of Las Vegas Sands (NYSE:LVS), Melco Resorts & Entertainment (NASDAQ:MLCO), and Wynn Resorts (NASDAQ:WYNN) on credit entry take in negative. That way those operators are vulnerable to potential downgrades to their collective credit grades.

China’s response to outbreaks of the COVID-19 Omicron variant inwards major cities and inward Macau and its strict curb measures has led to increased journey restrictions, limited visitation to Macau, and to a greater extent depressed levels of GGR than we previously forecast,” says S&P inwards the note.

In gain to trim its 2022 GGR estimate, the research unshakable pares its 2023 outlook. S&P now expects the gambling casino center’s revenue chalk up next year to come in at 50% to 70% of 2019 levels, land from a prior sound projection of 80%.

For Macau Operators, Uncertainty Abound

If there’s ane thing investors don’t like, it’s uncertainty, and there’s plenteousness of that to go around inward Macau at the moment.

“In particular, the untypically broad lay out for the revised forecast in mass GGR retrieval inward 2023 reflects significant precariousness concerning the duration of China’s zero-tolerance insurance regarding COVID-19,” adds S&P. “Macau’s monthly GGR in June 2022 drop to the lowest stratum since Sept 2020, amid the pip COVID-19 eruption in Macau (in terms of list of reported cases) since the outset of the pandemic.”

Concessionaries’ credit grades are reflecting punctuate and uncertainty. For example, LVS, the parent of Sands China, was of late stripped of its investment-grade Deutsche Mark by Fitch Ratings. Likewise, Moody’s Investors lowered its rating on MGM Resorts International (NYSE:MGM), which owns 56% of MGM China.

Among US companies that don’t green groceries semiconductors, LVS and Wynn are among the most dependant on Communist China (Macau) for revenue. With the cassino hub essentially a wraith townspeople for the clip being, Sands is more and more strung-out on Marina Bay Sands inward Singapore, patch Wynn needs to wrench more upside come out of its US venues inward Bean Town and Las Vegas.

Cash Concerns for Macau Operators

Potential deferred payment downgrades at the custody of a young spate of coronavirus cases come up as Macau concessionaires are already dealing with an regalia of financial issues.

Those include richly cash in incinerate rates, mounting debt, and what some analysts view as modified financing avenues. Regarding access to capital, some market place observers believe US-based parents may demand to funnel cash in to Macau units, as Wynn Resorts (NASDAQ:WYNN) late did, to keep those operations.

“A slower recovery inward Macau’s mass GGR testament final result inward greater cash burn mark and higher leverage at the destruction of 2022, placing greater grandness on an unsure recovery inwards 2023 and increasing the likeliness that leveraging may non improve at a lower place our downgrade limen before 2024,” according to S&P.

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