GGRAsia – Fitch downgrades SJM due to refinance delay and rebate doubts

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Fitch downgrades SJM due to refinancing delay and doubts over new tenders


Fitch Ratings Inc has downgraded Macau casino operator SJM Holdings Ltd’s long-term foreign currency issuer default rating, as well as its tier one secured rating, over concerns over ‘slow execution’ of the company to obtain a new 19 billion HKD (2.44 billion dollars). to lend.

The financial institution also cited in its memo on Monday concerns over “significant regulatory uncertainty” over SJM Holdings’ Macau gambling rights refresh, with the current license set to expire on June 26 this year.

The casino company’s long-term foreign currency issuer default rating and its senior unsecured rating were downgraded from ‘BB’ to ‘BB’, respectively. The rating on banknotes in circulation issued by a subsidiary, Champion Path Holdings Ltd, was also downgraded from “BB+” to “BB”. A “BB” rating indicates “speculative grade” investment grade, as defined by Fitch.

SJM Holdings is reportedly seeking a new HKD 19 billion long-term syndicated loan to repay existing HKD 14 billion syndicated loans with banks, which are due to mature on February 28, 2022. Fitch pointed to the delays that the company would have faced in obtaining the “necessary regulatory approvals” for a new loan.

“SJM Holdings simultaneously requested a one-year extension to the maturity of existing loans in the event that regulatory approvals were not obtained in time, which most banks agreed to,” Fitch analysts Samuel Hui wrote. , Adrian Cheng and Kalai. Pillay in Monday’s note.

The rating house said it expected SJM Holdings to be able to extend most of its existing loans. But the regulatory delays indicated its cash management was “weaker than expected”, Fitch said.

Another rating agency, Moody’s Investors Service Inc, announced on February 10, a downgrade on SJM Holdings’ corporate family rating and on its senior unsecured rating, on corporate guaranteed bonds. Moody’s also raised concerns about the delay in refinancing SJM Holdings.

Fitch, for its part, said on Monday that there was “little visibility” regarding SJM Holdings’ refresh of its gambling rights in Macau, and what would be the “impact of the regulatory and operating environment” on the cash flow and leverage of the company.

According to Fitch, the continuation of Covid-19-related travel restrictions that had hampered the recovery of Macau’s casino industry, also prompted the downgrade action.

All of Fitch’s credit ratings of SJM Holdings remain on “negative rating watch,” according to Monday’s statement.

This reflected the potential for “additional negative rating action if SJM Holdings cannot fully refinance its maturities with long-term capital, if it fails to secure a new gaming license, or if economic licensing terms more onerous burdens are imposed on SJM Holdings under new license terms, or if the recovery in gaming revenue does not materialize as Fitch expected,” the ratings house said.

Market-wide, Macau’s gross casino gaming revenue is expected to be “more than 40% below 2019 levels” this year, before falling back to “10% below 2019 revenue” by 2023, said Fitch.

The ratings house expects SJM Holdings to see its earnings before interest, tax, depreciation and amortization (EBITDA) margin gradually recover to 2019 levels by 2024. Fitch expects the company’s new Cotai ownership, Grand Lisboa Palace, will reach Property Adjusted EBITDA 0f 2.0 billion HKD in 2023 and 3.5 billion HKD in 2024.



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