Moody’s downgrades SJM again as debt pressures mount
Weak earnings and upcoming refinancing needs have raised concerns over the Macau operator’s ability to meet its financial obligations.
Key takeaways:
- Moody’s lowered SJM Holdings’ rating to B2 from B1, its second downgrade in six months.
- The agency also downgraded subsidiary bond ratings to B3 from B2 and changed the outlook to negative.
- SJM faces HKD1.9bn (US$242m) in convertible bonds that holders can require it to repurchase in June 2027, and US$500m in notes due in January 2028.
- Moody’s considers SJM’s liquidity weak, with cash and operating cash flow insufficient to cover debt payments and capital expenditure over the next 12 to 18 months.
- SJM recently reported a third-quarter loss after gaming revenue fell more than 27 per cent.
Macau.- Moody’s has downgraded Macau casino operator SJM Holdings for the second time in six months. The agency has lowered the company’s rating to B2 from B1 and shifted the outlook to negative from stable. It also cut the ratings on bonds issued by SJM’s subsidiaries to B3 from B2.
The agency cited SJM’s debt levels, stating that weak earnings and slower growth in Macau’s casino market had left the company with higher leverage than expected. It says the company’s cash and operating cash flow will not be enough to cover upcoming debt payments and capital spending over the next 12 to 18 months.
Key obligations include bank loans coming due, HKD1.9bn (US$242m) of convertible bonds that holders can force the company to buy back in June 2027, and US$500m of notes due in January 2028.
“The negative outlook reflects the uncertainty regarding the pace of deleveraging and the company’s significant refinancing needs over the next one to two years, which could weaken liquidity,” said Stephanie Lau, a senior vice president at Moody’s.
SJM runs Grand Lisboa, Grand Lisboa Palace. It posted a third-quarter loss after gaming revenue fell more than 27 per cent. Moody’s said it could cut the rating again if SJM does not make clear progress on refinancing in the coming months or if earnings recover more slowly than expected.
Frequently asked questions (FAQs)
- Why did Moody’s downgrade SJM Holdings? Moody’s cited SJM’s high debt levels, weak earnings and slower growth in Macau’s casino market, which have resulted in higher leverage and increased refinancing risks.
- What is SJM Holdings’ current credit rating? SJM Holdings has a B2 rating from Moody’s, down from B1. The agency also assigned a negative outlook. Bonds issued by its subsidiaries were downgraded to B3 from B2.
- How much debt does SJM Holdings need to refinance? Key obligations include HKD1.9bn (US$242m) in convertible bonds subject to a potential holder-forced buyback in June 2027 and US$500m in notes maturing in January 2028.
- Could Moody’s downgrade SJM Holdings again? Yes. Moody’s said it could lower the rating further if SJM fails to make clear progress on refinancing in the coming months or if its earnings recover more slowly than expected.
