Prominent financial services firm Moody’s Investors Service Incorporated has reportedly warned that Asian casino operator Melco Resorts and Entertainment Limited could see its consolidated debt rise by about 14.7% over the next twelve to 18 months to top $7 billion.
According to a report from Inside Asian Gaming, the American giant made the prediction yesterday while simultaneously issuing a ‘Ba2’ rating to a new $250 million bond offering being floated by the casino firm’s Melco Resorts Finance Limited subsidiary. The source detailed that this proposition is set to come due in 2029 with its proceeds being earmarked to help the operator behind the City of Dreams Macau, Studio City Macau and Altira Macau venues pay down some of its existing liabilities.
In issuing the optimistic grade, Moody’s Investors Service Incorporated reportedly extolled the current value of the assets held by Melco Resorts and Entertainment Limited before announcing that the firm’s debt to earnings ratio may rise to exceed ten-fold later this year due to ‘sluggish cash flow and planned capital spending.’ Regarding this final component and the financial services behemoth purportedly declared that expenses associated with the under-construction City of Dreams Mediterranean development in Cyprus along with the planned $1.4 billion expansion of the 1,600-room Studio City Macau venue would ‘likely lead to negative free cash flow during this period.’
Reportedly read the Thursday forecast from Moody’s Investors Service Incorporated…
“Given the above expectations, we project that Melco Resorts and Entertainment Limited’s adjusted debt to earnings before interest tax, depreciation and amortization will be elevated at around ten-times or higher in 2021 before improving to around five-times to six-times in 2022 and around four-times in 2023.”
Melco Resorts and Entertainment Limited reportedly saw its earnings before interest, tax, depreciation and amortization for the nine months to the end of September drop by over 118% year-on-year to a deficit of about $221 million owing to factors related to the ongoing coronavirus pandemic. Moody’s Investors Service Incorporated purportedly furthermore stated that there is ‘significant risk’ to its leverage projections ‘given the lingering uncertainties over the pace and extent of the company’s earnings recovery’ and that ‘a prolonged weakness in operations’ could lead to the casino operator posting ‘larger negative free cash flow and higher debt leverage.’
In related news and GGRAsia reported that Moody’s Investors Service Incorporated used a second Thursday note to warn investors about the ‘deteriorating situation’ in Malaysia regarding coronavirus and that this ongoing state of affairs may prove ‘credit negative’ for fellow Asian casino firm Genting Malaysia Berhad. The financial services giant purportedly gave the operator behind the pioneering Resorts World Genting development a revised ‘Baa2 negative’ rating while additionally asserting that the pandemic could ‘derail’ the firm’s future recovery and exacerbate its ‘already-weak credit metrics’.
Genting Malaysia Berhad recently reportedly pronounced that it would be reducing operations at its flagship Resorts World Genting property following the introduction of a new coronavirus-related movement control order impacting six Malaysian states. Moody’s Investors Service Incorporated purportedly advised that this market accounts for around 34% of the casino firm’s earnings and that any further disruption could see its ‘leverage increasing to around 7.3 times in 2021.’
Moody’s Investors Service Incorporated’s second Thursday filing reportedly read…
“We expect that Resorts World Genting will receive less visitors because of the travel restrictions, social distancing and density control measures as well as health and safety concerns. Genting Malaysia Berhad’s operating cash flow of around $1.1 billion over the next 15 months will be sufficient to cover an estimated capital spending and investment of around $3.2 billion and an estimated dividend payout of around $644 million.”