Melco Group track record to support ratings despite revenue slump

The operational track record and financial profile of MCE Finance, Melco Crown and Studio City Finance will support their credit ratings despite the downturn in Macau gaming revenue, Moody’s said in a note.
"Declining gaming revenue will weaken the companies' revenue and EBITDA generation, which in turn diminishes their debt-servicing capacity," says Kaven Tsang, a Moody's vice president and senior analyst. "Nevertheless, MCE Finance's established operations and strong financial profile will buffer it from a slowing market.”
Moody's expects that MCE Finance's financial profile will remain strong for its ratings, supported by its low debt leverage with projected debt/EBITDA at around 1.5x in the next two years, and robust liquidity.
Gross gambling revenue fell 30.4 percent in Macau in December, taking the gaming hub to its first annual decline since records began in their current form.
Moody’s says according to its estimates MCE Finance had cash and deposits of around $1.3 billion and undrawn banking facilities of $401 million as of 30 September 2014, which fully covers its capex of $400-$500 million and debt repayments of $257 million for the coming 12 months.
However, Studio City Finance may find it more difficult to ramp up its Studio City Project, which is scheduled to open in mid-2015, and to realize its revenue-growth and deleveraging plan in the next one to two years.
Moody's anticipates that Studio City Finance's financial metrics will remain weak in 2015 but could improve in 2016 with projected debt/EBITDA declining to around 6x, after Studio City completes a full operational year, it said.