The ratings agency cites “sluggish cash flow” and planned capital spending on Studio City and a Cyprus resort.
Macau.- Moody’s Investors Service has warned that Melco Resorts & Entertainment could see its consolidated debt increase from US$6.1bn to US$7bn in the next 12 to 18 months.
The operator’s new $250m senior notes announced last week received a Ba2 rating.
The company announced an offering of 5.375 per cent senior notes due 2029 to raise funds to repay the principal amount drawn under a revolving credit facility acquired by a subsidiary last April.
Moody’s estimated the company’s debt will grow due to “sluggish cash flow and planned capital spending”.
The capital spending relates to the phase two construction of Studio City and the development of an integrated resort in Cyprus.
Moody’s said: “Given the above expectations, Moody’s projects Melco’s adjusted debt/EBITDA will be elevated at around 10x or higher in 2021 before improving to around 5x to 6x in 2022 and around 4x in 2023.”
Moody’s also expects gaming revenue in Macau to improve in 2021 but starting from a very weak level.
Macaus’ Gaming Inspection and Coordination Bureau revealed that gross gaming revenues (GGR) reached MOP61bn (US$7.63bn) in 2020, down from MOP293.3bn in 2019.
The SAR’s recovery depends on the return of Chinese visitors but many travel restrictions remain in place and social distancing rules apply at casinos.