Moody’s downgrades SJM Holdings on concerns over financial and liquidity management

Moody’s Investors Service downgraded the corporate family of Macau’s casino concessionaire SJM Holdings, as well as the senior unsecured ratings of bonds issued by the company, due to delays in executing refinancing plans.

Moody’s said in a statement late last week that it had downgraded SJM’s family of companies rating – which assesses a family of companies’ ability to meet all of its financial obligations – from Ba1 to Ba2. The senior unsecured ratings of bonds issued by SJM’s subsidiary, Champion Path Holdings Limited, were downgraded from Ba2 to Ba3.

The revised ratings relate to SJM’s efforts to execute new HK$19 billion (US$2.4 billion) secured loan and revolver facilities to refinance its existing facilities, which mature on February 28, 2022. The execution of these new facilities remains delayed due to pending regulatory approvals.

While Moody’s expects SJM to be able to extend the maturity of existing loans by one year given the quality of its assets in Macau, and possibly execute approvals for its new banking facilities, l Analyst Sean Hwang said the delay “raises some concern about its finances and liquidity“. management.

“The downgrade review reflects the fact that SJM’s refinancing risk will remain elevated until its near-term maturities are fully refinanced. Further downgrading is possible if SJM fails to secure long-term funding to meet maturities in a timely manner.

The rating action also reflects growing operational uncertainties due to the slow recovery of gaming revenue in Macau due to COVID-19, Moody’s observed.

The agency said it had lowered its 2022 forecast for Macau’s mass-market GGR to about 50% of pre-COVID levels, which will in turn lead to a slower ramp-up of Macau’s Cotai integrated resort. 39 billion HK dollars (45 billion US dollars) of SJM, Grand Lisboa Palace, opened in July 2021.

“Based on these assumptions, Moody’s expects SJM’s Adjusted Debt/EBITDA to be approximately 4.0x in 2023, which positions SJM more appropriately in the Ba2 rating category,” Moody’s said.

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