Moody's raised Wynn Resorts' credit rating outlook to "stable."
Moody's Investors Service upgraded Wynn Resorts' (NASDAQ: WYNN ) corporate credit rating outlook to "stable" from "negative," citing the operator's decline in debt as one of the reasons for the move.
Ratings agencies affirmed the casino company's credit rating at "B1," which remains in junk territory. Macau, where Wynn owns Wynn Macau, which operates two integrated resorts, continues to recover, providing support for Moody's upgraded outlook.
"The expected recovery in Macau, coupled with strong performance at the company's Las Vegas and Encore Boston Harbor facilities, will support sales and earnings before interest, taxes, depreciation, and amortization (EBITDA) growth and lower leverage," Moody's noted. "The stable outlook reflects our view that the company will maintain good liquidity and adequate cash balances."
Wynn reduced its secured debt, which is important to bondholders because this form of debt is senior to unsecured debt. Moody's said it expects the gaming company to continue reducing secured debt relative to unsecured debt.
For Wynn: Moody’s call comes at the right time
Moody's upgrade of Wynn's credit outlook also includes a similar move for Wynn Macau, adding to an increasingly bullish argument for corporate bonds issued by the Special Administrative Region (SAR) franchisee.
While the share prices of Macau operators including Wynn Macau have fallen sharply recently, professional investors have flocked to bonds issued by these gaming companies. High yields, lower default risk and stability compared to other areas of China's junk bond market are driving market participants' acceptance of Macau commercial paper.
Moody's noted that Wynn's "credit profile reflects a decline in leverage from higher levels as the recovery continues, improving performance from the company's Macau operations and continued strong performance from the company's U.S. operations." "The rating Supported by the quality, visibility and reputation of the Company's resort properties - a factor that continues to differentiate Wynn from other gaming operators - and the Company's established and highly successful record of building large, high-quality properties. High Quality resort.”
The six Macau franchisees are Galaxy Entertainment, Melco Crown Entertainment (Nasdaq: MLCO), MGM China, Sands China, SJM Holdings and Wynn Macau.
Wynn downgrade/upgrade scenario
Wynn's credit rating is unlikely to be downgraded or immediately upgraded to investment grade in the short term, but those circumstances could change. For example, the issue could be subject to a downgrade if consumer spending on consumer discretionary items declines sharply or if the debt-to-EBITDA ratio reaches seven times or more.
The ratings could be upgraded if Moody's adjusted debt-to-EBITDA ratio remains below 6.0. Upgrading also requires good liquidity and continued revenue growth as well as strong positive free cash flow. " Moody's said.
The research firm believes Wynn has ample liquidity and upcoming bond maturities will be managed quickly.
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Source: www.casino.org
