Fitch downgrades SJM Holdings outlook citing slow recovery at GLP

Fitch Ratings has downgraded its outlook on SJM Holdings’ long-term foreign-currency Issuer Default Rating (IDR) from Stable to Negative last week, citing a slowdown in earnings and cash flow recovery from its flagship property in Cotai, Grand Lisboa Palace (GLP).

The credit rating agency also affirmed SJM’s rating at BB-, but indicated increasing uncertainty over the company’s deleveraging progress.

Fitch projects SJM’s EBITDA leverage will rise to more than 8 times in 2025, up from 7 times last year, before gradually falling below 5 times by 2027.

Fitch noted that SJM remains on a medium-term path to reduce debt and improve free cash flow, but warned that further operational weakness could trigger additional rating downgrades.

The downgrade follows GLP’s second-quarter performance, where revenue grew only 1% quarter-on-quarter, and EBITDA margin shrank to 3%.

These results missed expectations even on a luck-adjusted basis, contrasting with 8% industry-wide gaming revenue growth in the same period.

Fitch analysts attributed this to increased marketing expenses and intensifying competition from rivals’ new Cotai properties and heavy promotions. Samuel Hui, Rebecca Tang, and Tyran Kam added: “GLP also recorded a significant increase in operating expenses during the quarter, mainly due to increased marketing expenses […] This, along with stagnant revenue growth, led to margin contraction.”

Fitch further noted that SJM is pursuing initiatives to boost GLP’s appeal – improving connectivity, food and beverage, retail, and event offerings – but the effectiveness in reclaiming market share in Macau from its US-based peers remains uncertain.

Another key point noted by Fitch is SJM’s satellite restructuring.

As reported by the Times, the company already shuttered Casino Grandview and plans to permanently close six additional venues by year-end. However, Fitch notes, “It also intends to acquire the properties where Casino L’Arc Macau and Casino Ponte 16 are located, such that they can continue to operate as self-owned casinos with additional tables allocated.”

Currently, SJM Holdings owns a 51% majority stake in Pier 16 – Property Development, the entity that operates Ponte 16.

Fitch expects SJM to reallocate around 458 gaming tables and 4,000 staff from the closing satellite venues to its properties on the Macau peninsula, “given their proximity and similar positioning,” and acquire additional gaming space at Casino Lisboa from its parent company, Sociedade de Turismo e Diversões de Macau (STDM).

“Fitch’s base case assumes that SJM will retain two-thirds of the outgoing satellite casinos’ market share,” the ratings agency said, projecting higher margins at the peninsula venues. “Such tables should generate higher margins than the previous satellite operations, leading to EBITDA accretion,” the analysts added.

On the financial front, Fitch expects SJM to successfully refinance a USD500 million USD bond maturing in January 2026, alongside HKD1.25 billion and MOP300 million bonds due in May 2026. The company plans to manage these obligations through new bank loans and by drawing on an undrawn HKD3.1 billion credit facility.

“The remaining bond maturities can be covered by drawing down on its HKD3.1 billion undrawn revolver as of the end of the first half of 2025,” Fitch analysts added.