Standard & Poor's upgrades Wynn Resorts' credit rating, maintaining junk status

Standard & Poor's raised the credit ratings of Wynn and Wynn Macau to junk status.

Apr 8, 2024
2 min read
Wynn and Encore on the Las Vegas Strip. Standard & Poor's upgraded the credit ratings of
Wynn and Encore on the Las Vegas Strip. Standard & Poor's upgraded the credit ratings of the operator and its Wynn Macau


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Standard & Poor's upgrades Wynn Resorts' credit rating, maintaining junk status

Standard & Poor's (S&P) upgraded Wynn Resorts' (NASDAQ: WYNN ) credit rating one notch to "BB-" from "B+". The same measures apply to Wynn Macau's corporate credit profile.

With the upgrade to BB-, Wynn's credit rating remains three notches below investment grade. However, the latest update highlights the continued recovery in Macau, the company's largest operating market.

Mass-market gross gaming revenue (GGR) in Special Administrative Regions (SARs) could be 5% to 15% higher than 2019 levels in 2024, Standard & Poor's said in a report. The research firm has a "stable" outlook on Wynn's credit rating.

The stable outlook reflects our expectation that the company's ongoing recovery in Macau cash flow, coupled with relatively stable U.S. cash flow, could support an increase in leverage to a high of 4x next year from a low of 5x a year ago. 2023. This is despite rising development spending and shareholder returns," S&P said.

Rewards for Wynn shareholders include continued buybacks and the resumption of quarterly dividends, which the operator reinstated earlier this year.

Upgrades can increase power

S&P's credit upgrades to Wynn and Wynn Macau come at an interesting time. Shares in Macau franchises have tumbled recently, falling to levels last seen in 2022, when there was little activity in the gaming enclave.

Instead, global fixed-income investors have flocked to bonds issued by Macau gaming operators, betting on more stable high-yield alternatives to volatile Chinese real estate bonds. Wynn's upgrades may add to that excitement.

For Wynn bondholders and stock investors, there are signs that 2024 could be strong as the operator achieves the feat this year.

"We expect that the company's EBITDA improvement may accelerate in the coming quarters due to rising visitor numbers to Macau and increased hotel room supply in the market," S&P added. "As a result, we expect Wynn Macau's EBITDA in 2024 will be approximately 95% of 2019 levels. This means Wynn S&P Global Ratings' lease-adjusted net leverage will likely improve from the low 5x range in 2023 to below 5x in 2024. In comparison, 2019 4.9 times year-on-year.”

Wynn can cover upcoming expenses

Next year could be a good time for Wynn to reduce its leverage. Fees for two integrated resorts in Macau - Encore Boston Harbor in the United States and Wynn Al Marjan Island in the United Arab Emirates - are already in the pipeline.

New York is a wild card in terms of potential spending that could increase the carrier's influence. Working with commercial real estate company Related Cos. Wynn is trying to obtain one of three New York City casino licenses. If it is one of the winners, the company could launch a $5 billion (or more) project, although the cost would be shared with the companies involved.

"If Wynn is licensed in New York, licensing and development costs could cause its leverage to increase to more than five times. We believe New York is unlikely to select a licensee before the second half of 2024 and do not expect the company to before making any major investment," S&P concluded. "Given the complexity of construction in New York and the likely scope of the project, we anticipate development will likely take at least three to four years."

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