News that Wynn Macau Ltd has been provided a US$500 million revolving loan facility by its US-based parent company Wynn Resorts could imply that Macau’s operators are now having trouble borrowing from banks, according to Morgan Stanley analysts.
The loan facility, announced by Wynn Macau on Tuesday, is to be used by the company for working capital at a time when Macau’s concessionaires are said to be losing a combined US$800 million per quarter.
In a Wednesday note, Morgan Stanley’s Praveen Choudhary, Gareth Leung and Thomas Allen said the move signals “worsening liquidity of the Macau gaming segment” and “could imply operators having difficulties to borrow from banks,” with others likely to follow a similar path.
“Bond yields for Wynn Macau is 12%,” the analysts explained. “Bond yields for most other Macau operators also at >10%, making bond financing expensive.
“We expect Sands China and SJM could announce similar arrangements soon, unless SJM could complete refinancing soon.”
While concessionaires have already endured a torrid two years since the initial COVID-19 outbreak in early 2020, Morgan Stanley also warns that worse is to come with 2Q22 expected to see GGR fall even further than Q1.
“We expect 2Q Macau GGR at US$1.1 billion (-49% quarter-on-quarter and just 12% of 2Q19), the third-worst quarter since 2020,” they wrote.
“We estimate 2Q22 [Corporate EBITDA] for Macau at [a loss of US$600 million to US$700 million] versus [a loss of USS$9 million] in 1Q22. 2Q FCFE (after development capex) could be negative US$1.6 billion to US$1.7 billion for the industry versus a US$1 billion loss in 1Q22.”
Wynn Macau was on track to record an EBITDA loss of US$100 million in the June quarter, they added.
Despite the analysts’ concerns, Wynn Macau had said earlier this week that the loan facility provided by Wynn Resorts “highlights … confidence in the long-term growth potential of Macau and the availability of the facility further bolsters the company’s already strong financial position.”
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