GGRAsia – Macau op default risk lower than downgrade risk: S&P

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Macau default risk lower than downgrade risk: S&P


The actual credit default risk of Macau casino operators is lower than the respective downgrade risk, S&P Global Ratings said in an online briefing Thursday live, via Hong Kong.

Macau casinos are currently experiencing a period of zero day-to-day gambling revenue amid a one week break due to an outbreak of Covid-19 in the city.

Aras Poon, associate director of S&P Global, answered a question during the briefing about the risk of credit downgrades and even defaults among Macau names.

Mr Poon replied that amid Macau’s uneven market recovery, there was “a good chance that cash burn will continue”.

But he added, regarding a “default scenario”, which seemed “less likely in the next couple of years”, as Macau operators’ debt maturities were “really spread out over the long term”.

Last week, the institution reduced its forecasts for Macau Casino’s Gross Gaming Revenue (GGR) for 2022 and 2023. It also placed several Macau operators under scrutiny, with negative implications: Wynn Resorts Ltd; Las Vegas Sands Corp and Sands China Ltd; and Melco Resorts and Entertainment Ltd, and its units.

Mr Poon mentioned in Thursday’s briefing that the monitoring of these groups was due to their “significant” exposure to Macau in terms of earnings before interest, tax, depreciation and amortization (EBITDA) and cash flow.

Las Vegas Sands announced on Monday this week, a US$1 billion parental loan to Sands China, redeemable in 2028.

Poon noted in S&P’s Thursday briefing on Macau names: “A slower recovery in Macau GGR – particularly in the mass segment – will lead to greater cash burn and higher leverage at the end of 2022.”

He added that this placed “greater importance” on the quality of any recovery in 2023, as it would be an opportunity for issuers “to restore their credit matrix”.

The rating agency’s base case scenario also did not assume any “hard” costs or investments for Macau gambling license renewals for Macau operators this year or next year, in relation with a new public tendering process.

This was primarily due to the expectation that these hardware investment needs would be spread over a longer period of time, Melissa Long, global director of games and cruises at S&P, said during the presentation.



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