Moody’s Investors Service has downgraded the corporate family rating of Macau casino concessionaire SJM Holdings, as well as the backed senior unsecured ratings on bonds issued by the company, due to delays in the execution of refinancing plans.
Moody’s said in a release late last week that it had downgraded SJM’s corporate family rating – which assesses a corporate family’s ability to honor all of its financial obligations – from Ba1 to Ba2. The backed senior unsecured ratings on bonds issued by SJM subsidiary Champion Path Holdings Limited have been downgraded from Ba2 to Ba3.
The revised ratings relate to SJM’s efforts to execute new secured loan and revolving facilities of HK$19 billion (US$2.4 billion) to refinance its existing facilities, which come due on 28 February 2022. The execution of these new facilities remains delayed due to pending regulatory approvals.
While Moody’s expects SJM will be able to extend the maturity on existing loans for one year given the quality of its Macau assets, and eventually execute approvals to its new banking facilities, analyst Sean Hwang said the delay “raises some concern over its financial and liquidity management.
“The review for downgrade reflects the fact that SJM’s refinancing risk will remain elevated until its near-term maturities are fully refinanced. A further downgrade is possible if SJM fails to secure long-term financing to address the maturities in a timely manner.”
The rating action also reflects increasing operational uncertainties driven by the slow recovery of gaming revenue in Macau due to COVID-19, Moody’s observed.
The agency said it has lowered its 2022 forecast for Macau’s mass market GGR to around 50% of pre-COVID levels which will in turn result in slower ramp of SJM’s HK$39 billion (US$5 billion) Cotai integrated resort Grand Lisboa Palace, opened in July 2021.
“Based on these assumptions, Moody’s expects SJM’s adjusted debt/EBITDA to be around 4.0x in 2023, which positions SJM more appropriately in the Ba2 rating category,” Moody’s said.
