Fitch ‘BB-’ rating for Wynn group, Macau rebound key driver

Fitch Ratings Inc has assigned “a first-time” ‘BB-’ issuer default rating to U.S.-based casino operator Wynn Resorts Ltd and a number of its subsidiaries, including Wynn Macau Ltd. The group’s rating outlook is “stable”, stated the institution in a note published on Tuesday.

“The ratings reflect the high-quality portfolio of its gaming assets,” said Fitch.

Other factors included: the “expected improvement” in Macau’s gaming market in terms of visitor arrivals and “gaming activity,” which “is expected to drive further improvement” in the group’scredit metrics; “strong results” in Las Vegas, Nevada, in the U.S.; and “robust liquidity that should fund near-term capital projects and could lead to further debt reduction”.

Nonetheless, those catalysts were “somewhat offset” by the company’s “average diversification”, and the “capital required to fund current and potential capital projects, which could affect the pace of more meaningful credit improvement,” noted the ratings agency.

In Macau, the group runs the Wynn Macau casino resort (pictured) on the city’s peninsula, and Wynn Palace on Cotai.

According to Fitch, Macau’s gaming industry recovery helps the Wynn group “build strength”.

“The strong rebound in Macau gaming revenues following the removal of travel restrictions in early-2023 is expected to be an important driver of Wynn’s overall credit improvement,” stated the institution.

Fitch estimates that Macau mass-market baccarat has almost fully recovered to 2019 levels, particularly in the premium mass, “which is Wynn’s target market”.

“Mass-market baccarat was 91 percent of full-year 2019 levels, although fourth-quarter 2023 levels exceeded the fourth quarter of 2019,” the ratings agency observed.

It added: “Despite the rapid growth in gaming revenues, visitation and airline capacity remain below 2019 levels, and the rebound in those metrics should provide another source of further revenue growth over the near term.”

In the U.S., aside from properties in Las Vegas, the parent also operates Encore Boston Harbor in Massachusetts.

Wynn Resorts is working on a casino scheme in Ras Al Khaimah in the United Arab Emirates (UAE). Wynn Al Marjan Island in the UAE has been stated as a US$3.9-billion venture involving local partners, in which Wynn Resorts would be a 40-percent equity investor.

The group is also in the running for one of three downstate-New York licences. In September 2022, Wynn Resorts announced a partnership with U.S.-based real estate firm Related Companies LP to bid to develop a casino resort on an undeveloped plot of New York City’s Hudson Yards.

As results in Las Vegas and Macau “continue to improve,” Fitch expects the group’s earnings before interest, taxation, depreciation and amortisation, plus estimated rental expense (EBITDAR) leverage “to improve from slightly below 7x in 2023 to the low-5x range by 2025,through EBITDA growth and partial debt reduction.”

Fitch expects the Wynn group to be fresh cash flow positive “over the forecast horizon” to 2025.The group has US$2.8 billion in cash, US$792 million in short-term investments, and US$737 million of availability under a revolving loan facility, reflecting a “robust” liquidity, stated the institution.

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