Because of the uncertainty surrounding the timing of license re-renewals, Fitch has assigned Macau casino operators Las Vegas Sands and SJM Holdings a Rating Watch Negative (RWN) rating.
According to Fitch:
“The RWN reflects the material near-term regulatory uncertainty related to gaming concessions in Macau, whose 20-year term is set to expire on 26 June 2022. Near-term credit risk has increased with limited visibility into the re-bidding procedure, how the future regulatory and operating environment will impact cash flows and leverage, and the likelihood of incumbent operators’ ability to secure new gaming concessions.”
“Fitch views the possibility of incumbent concession holders failing to secure new concessions as low, although the risk cannot be ignored,” it added. “The operators have invested billions, are large local employers and critical government tax payers, and have supported the local and mainland government’s broader goals, such as the Greater Bay Area Initiative. The new concessions could also come with weaker operating economics, onerous capital commitments and reduced ability to upstream cash to parents, but this is difficult to predict until regulators provide greater clarity.”
“In the longer term, Fitch believes that the Macau gaming industry remains attractive, supported by the expanding middle class in China and the development of infrastructure in and around Macau,” it added.