Gaming | Melco’s earnings to worsen in 2021: Moody’s

Moody’s Investors Service Inc has stated that the business performance of Melco Resorts and Entertainment Ltd is forecast to go downhill in 2021, mainly undermined by its worsened ratio of adjusted debt to earnings before interest, taxation, depreciation and amortization (EBITDA).
The group’s adjusted debt/EBITDA will be heightened by “around 10 times or higher in 2021 before improving to around five to six times in 2022 and around four times in 2023,” according to the statement released by the bond credit rating firm on January 13.
This is ascribed to the group’s “sluggish cash flow and planned capital spending.”
The firm projects Melco’s consolidated debt level to surge to USD7 billion in the next 12 to 18 months, from $6.1 billion in September 30, 2020.
The planned spending includes the phase two construction of Studio City and the development of the City of Dreams Mediterranean which may lead to “negative free cash flow,” said the statement.
Moody’s forecast that Melco’s operations will stay “weak amid lingering pandemic-related disruptions.”
In the first nine months of 2020, the gaming operator saw a negative EBITDA of $221 million, compared with a $1.2 billion positive EBITDA a year earlier.
In the statement, Moody’s rated the 2021 outlook for Melco Resorts Finance Limited, wholly owned by Melco, as “negative.”
Moody’s said the gross gaming revenue in Macau will improve in 2021 “from the very weak level in 2020,” but stressed that the recovery will be “gradual and partial,” due to “remaining restrictions and social distancing measures and a lingering fear of infection.”
Properties of the gaming operator comprise City of Dreams, Studio City, Altira Macau, Morpheus and Mocha Clubs in Macau, as well as the City of Dreams in Manila and Cyprus Casinos.

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