Moody's says Macau decline is “credit negative” for rated companies

Wednesday 6th of May 2015

Moody's Investors Service says that the continued decline in Macau gaming revenue is “credit negative” for rated gaming companies.

Following Macau’s Gaming Inspection and Coordination Bureau announcement that year-on-year GGR declined 38.8 percent in April, Moody’s analysts say overall GGR is expected to remain weak for the rest of the year.

"The decline is credit negative for our rated gaming companies. We expect overall gross gaming revenue to remain weak for the rest of the year, and decline 25% to 30% year on year," said Kaven Tsang, a Moody's Vice President Tsang.

The lower gaming revenue will weaken companies' overall revenue and EBITDA generation, and so diminish their debt-servicing capacity, Moody’s said, rating the following companies: MCE Finance Limited (Ba3 positive), Melco Crown (Macau) Limited (Ba3 positive) and Studio City Finance Limited (B2 stable).

Moody’s said Macau’s gaming declines are due to China’s efforts to combat corruption and the slowing Chinese economy.

The ratings company added that Galaxy’s upcoming resort will stiffen competition for gaming companies while Studio CIty will face challenges in achieving its planned revenue growth.

“MCE Finance's strong financial profile and established operations buffer the company from the slowing Macau gaming market, but Studio City will face challenges in realizing its planned revenue growth and deleveraging, says Moody's. In addition, the scheduled opening of another integrated resort by Galaxy Entertainment Group Limited (unrated) will further increase competition.”

“Still, Studio City's emphasis on non-gaming activities and mass-market gaming will partly mitigate the challenges,” Moody's added.