Melco Resorts & Entertainment’s credit rating has been downgraded by S&P Global due to a slow recovery amid the Covid-19 pandemic in Macau and the Philippines.
Macau.- The casino operator Melco Resorts & Entertainment has had its credit rating downgraded because of the Covid-19 pandemic and resulting slow performance. S&P Global also downgraded the company’s Studio City unit from BB to BB-. It doesn’t expect a full recovery for Macau until 2023.
According to analysts, Macau’s GGR for next year will only reach between 60 to 70 per cent of 2019 levels. Melco’s EBITDA will reach pre-pandemic levels in 2023, they predict.
“We anticipate leverage will stay elevated at 6.0x-7.0x in 2022 and then decline to 3.3x-3.7x in 2023,” the analysts said. “This compares with our earlier expectation that MLCO will improve its leverage to below 3.5x by late 2021 or early 2022 on a run-rate basis.”
Although revenue recovery has been slow, the casino operator is proceeding with its Studio City Phase II development and City of Dreams Cyprus, which will bring about a 40 per cent increment in the organisation’s obligation in 2023 when compared with 2019 levels.
Regarding Macau’s gaming law revision, S&P Global said Melco is sure to have the option to reestablish its concession, but authorities might force new conditions that could affect income.
According to local media reports, 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 it will maintain at least six gaming concessions.
The government also wants to increase the oversight of gaming concessionaires and junket operations, but it will maintain at least six gaming concessions. Representatives from Macau’s casino operators have attended a public consultation session with authorities and asked for more information on the government’s proposed changes.
Macau’s gaming market may not recover until 2025, analysts say
The road to recovery for the gaming industry in Macau has a long way to go, with analysts now predicting that gross gaming revenue may not return to pre-pandemic levels until 2025.
Analysts at Sanford C. Bernstein predict that Macau’s GGR will reach 87 per cent of 2019 levels in 2023 and 106 per cent by 2025.
While mass-market results are expected to arrive at 144 per cent of 2019 levels by 2025, VIP results are assessed to just recover to around 46 per cent, as the segment ‘fades away’.
Analysts recently forecast that GGR for 2021 as a whole will be down 69 per cent from pre-pandemic levels but up 51 per cent when compared to 2020 figures.