Research Update: Melco Resorts And Studio City Outlook Revised To Stable From Negative On Faster Recovery; Ratings Affirmed

The recovery in Macao's gross gaming revenue (GGR) in 2023 has been faster than we anticipated. We now expect mass GGR in Macao to improve to 75%-85% of 2019 levels, rather than our previous forecast of 60%-70%. Our update implies Melco Resorts&Entertainment Ltd. (MLCO) will finish 2023 with a leverage ratio of 6.3x, down from our previous expectation of 6.9x. Leverage should further drop to 3.8x in 2024, below our downgrade threshold for the current ratings. As a result, we revised the rating outlook on MLCO's operating subsidiaries, Melco Resorts (Macau) Ltd. (MRM) and Studio City Co. Ltd., to stable from negative. At the same time, we affirmed our long-term issuer and issue credit ratings on MRM at

...- The recovery in Macao's gross gaming revenue (GGR) in 2023 has been faster than we anticipated. We now expect mass GGR in Macao to improve to 75%-85% of 2019 levels, rather than our previous forecast of 60%-70%. - Our update implies Melco Resorts & Entertainment Ltd. (MLCO) will finish 2023 with a leverage ratio of 6.3x, down from our previous expectation of 6.9x. Leverage should further drop to 3.8x in 2024, below our downgrade threshold for the current ratings. - As a result, we revised the rating outlook on MLCO's operating subsidiaries, Melco Resorts (Macau) Ltd. (MRM) and Studio City Co. Ltd., to stable from negative. At the same time, we affirmed our long-term issuer and issue credit ratings on MRM at '##-' and on Studio City at 'B+'. - The stable rating outlook reflects our view that Macao's faster mass-market recovery should allow MLCO to recover its revenue and cash flow strongly in 2023 and reduce its leverage to below our downgrade threshold in late 2023 or early 2024....

Research Update