Macau rebound key driver for Fitch’s projections for Wynn

Fitch Ratings has assigned a first-time ‘BB-’ Issuer Default Rating (IDR) to Wynn Resorts Limited and its subsidiaries in light of its expected improvement in Macau’s gaming market.

Improvements in visitation and gaming activity are expected to drive further improvement in credit metrics, while strong results in Las Vegas and robust liquidity available to fund near-term capital projects are expected to potentially lead to further debt reduction, according to a report.

Fitch’s stable outlook rating reflects the credit rating provider’s view that the Macau market will continue to recover due to the removal of travel restrictions post-pandemic, a healthy Las Vegas market, and strong liquidity.

The group anticipates that the strong rebound in Macau gaming revenues following the removal of travel restrictions in January 2023 will be an important driver in the improvement of Wynn’s overall credit rating.

The reopening of the border has long been awaited by casino operators, as the pandemic created a severe downturn in casino cashflows.

Mass market baccarat has almost fully recovered to 2019 levels, particularly in the premium mass segment, which is Wynn’s target market. Mass market baccarat reached 91% of the full year 2019 levels, although fourth quarter (4Q) of 2023 levels exceeded fourth quarter 2019 levels.

However, the report noted that despite the rapid growth in gaming revenues, visitation and airline capacity remain below 2019 levels, and the rebound in those metrics should provide another source of further revenue growth over the near term.

Performance at Wynn Palace, meanwhile, has responded strongly, with mass market revenues and property EBITDAR margins for the third quarter of 2023 already above 2019 levels.

“Wynn Macau has rebounded a bit slower as the property continues to focus away from the VIP market, while increasingly catering more to the premium mass market,” it added.

Also, Fitch expects the credit rating will continue to improve, despite the existence of several material capital projects in Macau, Las Vegas, Boston and the United Arab Emirates.

In the pipeline is Wynn’s plans to expand its Boston Harbor complex through the addition of parking and other amenities. The project is expected to begin in 2024 and scheduled for completion in 2026.

Wynn has committed to USD2.2 billion of investment over 10 years following the grant of fresh licenses for casino operations. The investment, which is a mandatory requirement under the gaming law overhaul, is split between USD1.2 billion in capital expenditure and USD1 billion for non-gaming focused operations, such as concerts and events.

The commitment could increase by 20% if total Macau gross gaming revenue exceeds MOP180 billion.