Macau offers credit risk for casino companies: Moody’s
Macau’s proposals presented on September 14 to change the legal framework for its casino industry are “negative credit” for companies associated with the Macau sector, according to Moody’s Investors Service Inc.
The institution wrote in a note on Friday that the reason the Macau government’s proposals were negative for credit for casino companies was “because the consultation document highlights the government’s intention to tighten its oversight. and its regulatory oversight on the gaming sector ”via measures including control of operator dividends, and through a system of delegates appointed by the Macao government to supervise operators.
Moody’s said that, “while the trend is not new, the increasing regulations and constraints placed on the city’s gaming operators will likely mean that operators will incur higher costs and investments for compliance.”
He further suggested: “Operators would likely have some ability to pass increased costs on to customers to help ease the burden.”
Moody’s notably mentioned the operators exposed to Macao and covered by the credit institution, namely: Las Vegas Sands Corp (Baa3 negative) parent company of Sands China Ltd; Melco Resorts Finance Ltd (Ba2 negative), the financing arm of the licensee of Macao Melco Resorts and Entertainment Ltd; and MGM Resorts International (Ba3 negative), parent company of Macao licensee MGM China Holdings Ltd.
The same goes for: Macao operator SJM Holdings Limited (Ba1 negative); and Wynn Resorts Finance, LLC (Ba3 negative), the financing arm of Wynn Resorts Ltd, which in turn is the parent company of Macau licensee Wynn Macau Ltd.
Moody’s “Baa” ratings represent the lowest “investment grade” level for financial products. “Ba” ratings are considered to have “speculative elements and are subject to substantial credit risk”.
The document, written by analysts Sean Hwang, Adam McLaren, John Puchalla and Keun Woo Park, said Moody’s expected the six current Macau operators to be able to remain in the market beyond the expiration of licenses. current in June 2022. The institution believed that there was “a chance that the Macao government could require a single lump sum payment” from each operator, “but the size and timing of these payments remains uncertain.”
He believed that the risk of what he called the “non-renewal” that might exist, would be “magnified for the United States.[-controlled] operators because uncontrollable geopolitical issues present a greater risk ”.