Wynn Resorts Credit Rating Outlook Upped to Stable by Moody’s

Posted on: December 12, 2023, 03:04h. 

Last updated on: December 15, 2023, 10:12h.

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

The outlook on Wynn Resorts’ (NASDAQ: WYNN) corporate credit rating was upgraded to “stable” from “negative” by Moody’s Investors Service, which cited the operator’s declining leverage as one of the reasons for the move.

Wynn Resorts
Wynn Las Vegas. Moody’s upgraded the outlook on the operator’s credit rating to “stable.” (Image: Eater Vegas)

The rating agency affirmed the casino company’s credit rating at “B1,” which is still well into junk territory. Macau, where Wynn’s Wynn Macau unit runs two integrated resorts, continues rebounding, providing ballast for Moody’s outlook upgrade.

The expected recovery in Macau, coupled with the strong performance at the company’s Las Vegas and Encore Boston Harbor properties will support revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) growth and drive leverage down,” observed Moody’s. “The stable outlook incorporates our view that the company will maintain good liquidity, with ample cash balances.”

Wynn is reducing secured debt, which is pertinent to bondholders because that form of debt takes precedence over unsecured obligations. Moody’s said it expects the gaming company to continue paring secured liabilities relative to unsecured debt.

For Wynn, Good Timing on Moody’s Call

Moody’s upgrade of Wynn’s credit rating outlook also included a similar move for Wynn Macau, adding support to the increasingly bullish thesis for corporate bonds issued by concessionaires in the special administrative region (SAR).

While shares of Macau operators, including Wynn Macau, have scuffled of late, professional investors have flocked to debt issued by those gaming companies. High yields, declining default risk, and stability relative to other corners of the Chinese junk bond market are prompting market participants to embrace Macau commercial paper.

Wynn’s “credit profile reflects the improving performance of the company’s Macau operations as the recovery continues, and the continued strong performance of the company’s US operations, driving leverage down from elevated levels,” noted Moody’s. “The rating is supported by the quality, popularity, and favorable reputation of the company’s resort properties — a factor that continues to distinguish Wynn from other gaming operators — along with the company’s well-established and very successful track record of building large, high-quality destination resorts.”

The six Macau concessionaires are Galaxy Entertainment, Melco Resorts & Entertainment (NASDAQ: MLCO), MGM China, Sands China, SJM Holdings, and Wynn Macau.

Downgrade/Upgrade Scenarios for Wynn

Over the near term, Wynn’s credit rating isn’t likely to be downgraded, nor is an upgrade to investment-grade territory imminent, but those scenarios could change. For example, the issue could be vulnerable to a downgrade if consumer discretionary spending sharply retreats or if its debt-to-EBITDA ratio reaches or exceeds 7x.

Ratings could be upgraded if debt/EBITDA on a Moody’s adjusted basis is maintained below 6.0x. Good liquidity and continued revenue growth with strong positive free cash flow would also be needed for an upgrade,” according to Moody’s.

The research firm expects that Wynn will maintain adequate liquidity and that upcoming bond maturities will be managed in an expeditious fashion.