Moody’s forecasts a bright future for Melco Resorts

Lea Hogg April 10, 2024

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Moody’s forecasts a bright future for Melco Resorts

Melco Resorts & Entertainment is on a promising trajectory as ratings agency Moody’s anticipates that the company’s adjusted EBITDA will surge to approximately US$1.3 billion in 2024, a substantial increase from US$900,000 in 2023. This growth is expected to significantly aid Melco in diminishing its debt profile.

Following Melco’s announcement that its fully-owned subsidiary, Melco Resorts Finance, is considering a Senior Notes offering, Moody’s expressed optimism. The agency believes that the increased cash flow in the upcoming year will enable Melco to further decrease its debt, which stood at US$8.7 billion at the end of 2022. Melco has already repaid around US$1 billion of this debt and has pledged to prioritize debt reduction in the near future.

Macau’s market revival

Moody’s projects that Melco Resorts & Entertainment’s adjusted debt/EBITDA ratio will improve to approximately 5.5x this year and further to about 4.2x in 2025, down from around 8.6x in 2023. The agency has assigned a Ba3 rating to the proposed Senior Notes.

Melco’s liquidity position is robust. Moody’s anticipates that, with Melco’s US$1.3 billion in cash as of the end of 2023 and operating cash flow, the company will have ample liquidity for its capital expenditures and debt repayments over the next 12 to 18 months. The proposed bond offering by Melco is expected to further enhance the company’s liquidity profile.

Gloria Tsuen, Moody’s Vice President and Senior Credit Officer, stated, “The Ba3 rating primarily reflects Melco Resorts & Entertainment Limited’s established operations and high-quality assets, as well as our expectation that its financial leverage will continue to improve significantly during 2024-25 as the gaming market in Macau SAR, China, maintains its strong recovery.”

Moody’s added that it could upgrade the ratings assigned to Melco Resorts Finance if Melco continues to enhance its earnings, reduce its debt, and maintain strong liquidity, such that its adjusted debt/EBITDA declines to below 4.5x to 5.0x on a sustained basis.