Moody projects Melco earnings to continually improve

Moody’s Investors Service has assigned a stable outlook to Melco Resorts Finance Ltd. and Studio City Finance Ltd., signaling its belief earnings and financial leverage at the casino-linked financing entities will continue improving over the next 12 to 18 months.

The ratings agency has assigned Melco Resorts Finance, wholly owned by Melco Resorts & Entertainment Ltd., a “Ba3” corporate family rating.

Moody’s expects Melco Resorts’ adjusted debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) to improve between 5.2x and 6.2x over the next year and a half, down from 8.6x in 2023.

“The recovery in Macau’s gaming market after China’s reopening in early 2023 will drive higher earnings and debt reduction,” said Moody’s.

This projected improvement is driven by expectations Macau’s gaming market will see higher earnings and debt reduction following the mainland’s reopening.

Studio City Finance was assigned a “B1” rating with a stable outlook.

Moody’s anticipates its adjusted debt to EBITDA will drop six to seven times by 2025 amid the market recovery in Macau, supporting the rating.

However, Moody’s noted Studio City Finance “will not pay dividends for at least the next one to two years” due to high leverage from debt used for capital spending during the pandemic.

“Studio City Finance has never paid dividends in its history,” the agency conceded.

Moody’s observed Melco Resorts has “very good” liquidity, with USD1.1 billion in cash and a USD1.9 billion revolving credit facility to cover needs for at least 18 months.

The agency also said Melco Resorts has extended the maturity of its USD1.92 billion credit facilities by two years to April 2027 and issued USD750 million in eight-year bonds, fully addressing its debt maturities through the end of 2025. Victoria Chan