Moody’s downgrades SJM Holdings ratings

Analysts at Moody’s Investors Service have downgraded SJM Holdings Ltd’s corporate family rating from Ba1 to Ba2.

Macau.- Moody’s Investors Service has downgraded SJM Holdings Ltd‘s corporate family rating and the company’s senior unsecured rating on its guaranteed bonds. The agency said in a report that the downgrade reflected “continued delays” in the execution of the company’s refinancing plan.

SJM Holdings’ corporate family rating was downgraded from Ba1 to Ba2 while the senior unsecured rating on the notes issued by Champion Path Holdings Ltd and guaranteed by the casino company was downgraded to “Ba3”.

Moody’s “Ba” rating indicates a “speculative grade” for credit quality, according to Moody’s rating guidelines. According to analysts, the main reason for the downgrade was SJM’s persistent delay in executing its refinancing plan which has raised concerns about its financial and liquidity management.

Moody’s revealed SJM has been looking to execute a new secured loan and revolving loan facility for HK$19bn (US$2.44bn) to refinance its existing financing, due on February 22, 2022. Analysts noted that the execution of the new facility remains “delayed due to pending regulatory approvals”.

However, Moody’s said it expects SJM to extend the term of its existing loan in case it faces “further regulatory delays”. The balance of existing facilities was about HK$13bn by the end of 2021.

Moody’s said the downgrade also reflects the increased operational uncertainty the company faces amid the ongoing Omicron outbreak in China and a “slow recovery” in Macau’s gaming revenue trends. The agency said it expects a slowing market recovery in Macau to “lead to slower growth in SJM’s Cotai property, the Grand Lisboa”.

Analysts stated: “Based on these assumptions, Moody’s expects SJM’s adjusted debt to EBITDA [earnings before interest, taxation, depreciation and amortisation] to be around 4.0 times in 2023, which positions SJM more appropriately in the Ba2 rating category.”