Research Update: Melco Resorts And Studio City Ratings Placed On CreditWatch Negative As COVID Surge Clouds The Path To Recovery

COVID-19 outbreaks in China and Macao have led to increased travel restrictions, limited visitation to Macao, and weakening gross gaming revenue (GGR) relative to already depressed 2021 levels. As a result, we lowered our GGR forecast for Macao in 2022 and 2023. Our base case now assumes Macao's GGR will be only 20%-30% of 2019 levels in 2022, and more importantly, mass GGR to be 50% to 70% of 2019 levels in 2023. As a result, we placed all ratings on MLCO's operating subsidiaries Melco Resorts (Macau) Ltd. (MRM) and Studio City Co. Ltd. (Studio City) on CreditWatch with negative implications. In resolving the CreditWatch, we plan to assess how quickly MLCO may be able to reduce S&P Global Ratings

...- COVID-19 outbreaks in China and Macao have led to increased travel restrictions, limited visitation to Macao, and weakening gross gaming revenue (GGR) relative to already depressed 2021 levels. As a result, we lowered our GGR forecast for Macao in 2022 and 2023. - Our base case now assumes Macao's GGR will be only 20%-30% of 2019 levels in 2022, and more importantly, mass GGR to be 50% to 70% of 2019 levels in 2023. - As a result, we placed all ratings on MLCO's operating subsidiaries Melco Resorts (Macau) Ltd. (MRM) and Studio City Co. Ltd. (Studio City) on CreditWatch with negative implications. - In resolving the CreditWatch, we plan to assess how quickly MLCO may be able to reduce S&P Global Ratings adjusted net leverage below 4.5x amid Macao and China's evolving policies against the pandemic....

Research Update