Resorts World Las Vegas Gets Lowest Investment Grade Rating at Fitch

Posted on: July 18, 2023, 10:08h. 

Last updated on: July 20, 2023, 05:19h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Fitch Ratings tagged Resorts World Las Vegas with a “BBB-“ credit rating, the lowest on the investment-grade spectrum.

Resorts World Las Vegas
Resorts World Las Vegas. Fitch Ratings gave the venue a “BBB-” credit rating. (Image: Jeff Scheid/Nevada Independent)

That’s one notch below the research firm’s “BBB” grade on Resorts World Las Vegas parent company Genting Bhd. Fitch notes the Strip venue is one of the three crown jewels of the Genting gaming empire, along with a flagship property in its home country of Malaysia and Resorts World Sentosa in Singapore. As such, the parent company is incentivized to provide financial support to the Las Vegas venue.

We expect RWLV to contribute over 20% of GENT’s proportionately consolidated earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) from 2024,” noted Fitch. “The ‘Medium’ operational incentive is driven by the sharing of the Resorts World brand and integrated management decision-making, despite limited operational synergies, as GENT’s casinos operate independently.”

The $4.3 billion Resorts World Las Vegas, the Strip’s most expensive integrated resort in terms of construction costs, opened in June 2021.

Resorts World Las Vegas Ramp-Up Has Been Slow

A frequent critique of Resorts World Las Vegas among analysts is that the integrated resort has been slow to ramp up. That’s understandable, as much of its first year of operations was spent dealing with the aftermath of the worst of the coronavirus pandemic.

However, this isn’t a time for excuses, especially when visitation to the Strip remains sturdy, and hotel occupancy rates are high. Additionally, the convention business is bouncing back, and Las Vegas is slated to host a slew of marquee events in the coming months, which could benefit the Genting property.

The Genting venue, the first newly minted Strip property in over a decade, is situated at the northwest end of the Strip, where the Stardust Casino was previously located.

“It also faces significant competition in a mature market and will have to gradually carve its brand identity to compete effectively. We estimate a ramp-up towards an EBITDAR of USD 350 million by 2025, from around USD 115 million in 2022,” added Fitch.

The research firm pointed out that the property’s 2022 EBITDAR and margins disappointed, signaling vulnerability to a spike in inflation.

Resorts World Las Vegas Rating Factors

Bondholders hoping for an upgrade to RWLV’s credit rating should hope for the same for parent Genting, or “perceived strengthening of operating or legal incentives for GENT to support RWLV,” according to Fitch.

The research firm’s rating on RWLV could be adversely affected if Genting suffers a downgrade or if legal and operating incentives weaken in a material fashion.

For now, Genting’s  “BBB” credit rating doesn’t appear to be in danger of a downgrade. The operator has the resources to support that grade, which is two notches above rival Las Vegas Sands and on par with Hard Rock International.