Bulletin: China's COVID Surge To Slow Melco's Recovery

This report does not constitute a rating action. HONG KONG (S&P Global Ratings) May 10, 2022--Surging COVID-19 cases in China will retard Melco Resorts&Entertainment Ltd. (MLCO)'s recovery this year. The current COVID situation and control measures in China have reduced the number of mainland Chinese visitors to Macao. This has affected the revenue recovery of the Hong-Kong based MLCO, which owns and operates integrated resorts in Macao. The debt-to-EBITDA ratios of MLCO's operating subsidiaries, Melco Resorts (Macau) Ltd. (BB-/Negative/--) and Studio City Co. Ltd. (B+/Negative/--), are unlikely to recover to 4.5x, the notching-down threshold for the ratings, until 2023. This is when we now expect the mass gaming segment to recover more substantially. Our current base case assumes

...HONG KONG (S&P Global Ratings) May 10, 2022--Surging COVID-19 cases in China will retard Melco Resorts & Entertainment Ltd. (MLCO)'s recovery this year. The current COVID situation and control measures in China have reduced the number of mainland Chinese visitors to Macao. This has affected the revenue recovery of the Hong-Kong based MLCO, which owns and operates integrated resorts in Macao. The debt-to-EBITDA ratios of MLCO's operating subsidiaries, Melco Resorts (Macau) Ltd. (##- /Negative/--) and Studio City Co. Ltd. (B+/Negative/--), are unlikely to recover to 4.5x, the notching-down threshold for the ratings, until 2023. This is when we now expect the mass gaming segment to recover more substantially. Our current base case assumes that mass gross gaming revenue (GGR) will be above 80% of 2019 levels in 2023. We estimate MLCO will lose US$0.5 million-US$1.0 million a day at the EBITDA level at its Macao operations at the current GGR run rate. This cash burn may persist for another one...

Bulletin