Fitch downgrades ratings for three Macau casino operators

Fitch has downgraded gaming companies due to regulatory uncertainty in Macau.
Fitch has downgraded gaming companies due to regulatory uncertainty in Macau.

The ratings of Las Vegas Sands Corp., SJM Holdings Ltd. and MGM Resorts International have been downgraded due to uncertainty surrounding the Covid-19 pandemic and a possible increase in the oversight of gaming concessionaires.

Macau.- Fitch Ratings has revised its outlook for three Macau casino operators and placed them with negative ratings, mainly due to “regulatory uncertainty” in Macau. It’s downgraded Las Vegas Sands Group (the parent company of Sands China Limited), MGM Resorts International (the parent company of MGM China Holdings Limited) and SJM Holdings Ltd.

Analysts said the decision was taken because “failure to secure a new gaming concession or more onerous economic licensing conditions” may have a significant negative credit impact.

However, the ratings agency stated that it expects the arrangement to be “pragmatic” in the period after June 2022, when the six existing Macau casino operating agreements will expire. Fitch added that it believes all three will “continue to operate in Macau for a long time.”

Las Vegas Sands‘ current rating is “BBB-“, which is the lowest “investment grade” level, as its business or financial conditions may “no longer meet investment grade” in terms of ratings. Meanwhile, Fitch said that the domestic credit status of MGM Resorts is consistent with the “BB-” issuer’s default rating, thanks to its fully restored US business – Macau contributes less to its annual cash flow (about 20 per cent).

As regards SJM Holdings, analysts said the casino operator remains on track to refinance its existing bank loans, which will expire at the end of February 2022, with a new loan line of HKD19.0bn (US$2.44bn).

Fitch Ratings stated: “Fitch views the possibility of incumbent concession holders failing to secure a new concession as low, though the risk should not be ignored. 

“The operators have invested billions of U.S. dollars in capital, are large local employers and critical government taxpayers, and have supported the local and Mainland government’s broader policy goals, such as the Greater Bay Area Initiative.”

Focus Gaming News previously reported that authorities in Macau want to end the current sub-concession system that led to the creation of three additional Macau casino licences. The government also wants to increase the oversight of gaming concessionaires and junket operations but seems likely to maintain at least six gaming concessions.

Authorities have also proposed electing “delegates” to Macau’s gaming concessions, so it can have a “greater checking” limit on the activity of the gaming firms. A delegate system is already used to monitor other forms of public concession.

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