Gaming | Fitch: casino operators might face ‘onerous’ terms under new licenses

Fitch Ratings has said that Las Vegas Sands will very likely secure a new Macau concession once its current arrangement expires in June 2022. However, the credit rating agency also noted that it sees “plausible risk” in the casino operator being subject to more “onerous” terms under a new license.
In a note published on Saturday (Macau time), Fitch Ratings affirmed the long-term issuer default ratings of Las Vegas Sands (LVS) and its subsidiaries at BBB-. The credit rating agency also affirmed Las Vegas Sands’ and Sands China’s senior unsecured debt at BBB-, while Marina Bay Sands’ existing senior secured revolver and term loan is set at BBB. The rating outlook for the company and its subsidiaries is ‘Positive’, according to Fitch.
The Fitch note advises that the upcoming concession negotiations prevent the Las Vegas Sands rating from being upgraded to BBB.
“The expiration of the Macau concession in June 2022 remains the main remaining credit risk preventing an upgrade of LVS’ Long-Term IDR to ‘BBB’,” the note reads.
“Fitch believes that the risk of the concession not being extended is very remote. A more plausible risk is LVS being subject to onerous extension terms, such as a higher tax, a concession payment, or a call by the government for significant lower ROI investments.”
Also weighing into its rating calculation is the fact that Las Vegas Sands’ subsidiaries are “well capitalized and are not reliant on the parent for support.”
In general terms, the U.S.-based casino operator has a “favorable Macau exposure” via its subsidiary. Fitch expects the company to experience mid-single digit growth at its properties and slightly exceed the broader Macau market, given its mass market pivot.
Sands Cotai Central could experience some disruption into next year as it undergoes its transformation into The Londoner Macao, however this is unlikely to dampen the overall credit profile of Las Vegas Sands and Sands China, added Fitch.
All six of Macau’s gaming concessions are due to expire in June 2022. The government has disclosed little about the upcoming process, and most analysts expect no further information to be released until after the change in administration this December.