The New York-based ratings agency believes the RWN, which is a reflection of a firm’s worsening credit score, remains appropriate based on the increased near-term credit risk posed by the limited visibility into Macau’s concession re-bidding procedures. MGM China’s current gaming concession expires in June 2022.
The Fitch report also highlighted concerns over “how the future regulatory and operating environment will impact cash flows and leverage, and the likelihood and consequences of incumbent operators' ability to secure a new gaming concession.” This was in spite of acknowledging the MGM Resorts balance sheet had improved recently.
Fitch also took the assumption that it will be a further two years before the Macau gaming industry reaches the same levels it did in 2019, in terms of revenue, but adds the proviso that this is dependent on a return to normalised visitation levels to the area.
Fitch stated: “The longer operations and cashflows remain depressed (e.g. government policy responses to current and future variants), the more maintenance of current credit profiles will depend on issuers taking offsetting actions.”
The RWN, which affects several crucial business indicators, such as share price, investor confidence and credit rating, could be lifted in the near future when there is greater clarity over Macau’s gaming concession re-bidding process. Fitch also expects MGM Resorts' strong performance in the US to offset any weaknesses in its Asian markets.
The gaming industry in Macau has come under intense scrutiny in recent weeks. The arrest of Suncity Group’s CEO, Alvin Chau, has left many in doubt over the future of the junket operating model. A number of VIP junket casino rooms have already closed in the area, with several others rumoured to follow.
