Studio City Co. Ltd.

We still see pent-up demand for casinos and anticipate a full recovery in 2022 when travel activities further normalize. We maintain our forecast that Macau's GGR for 2021 will be 30%-40% below its 2019 levels. However, the recovery will be bumpy, partly because of visa limitations, testing requirements, and travel fears. Additional constraints include continued quarantine restrictions for Hong Kong visitors, economic challenges, and reduced gaming capacity. The negative rating outlook on Studio City reflects our view of a still meaningful risk related to recovery in the tourism industry in Macau and the Philippines. The ongoing pandemic has delayed the recovery and will likely result in the company's credit metrics staying above our downgrade threshold through the end of 2021.

...Studio City to gradually recover from the effects of the pandemic in the next 12-18 months. Macau's gross gaming revenue (GGR) for the first quarter of 2021 recovered to about 30% of pre-pandemic levels. Mass segment GGR was close to 37% and VIP segment GGR was around 25% of levels before the COVID-19 outbreak. This recovery was largely in line with our expectation. Studio City's first-quarter results came in modestly below expectation due to softness in the VIP segment owing to unfavorable win rates and lower volumes. Yet, mass segment recovery remains on track. We still see pent-up demand for casinos and anticipate a full recovery in 2022 when travel activities further normalize. We maintain our forecast that Macau's GGR for 2021 will be 30%-40% below its 2019 levels. However, the recovery will be bumpy, partly because of visa limitations, testing requirements, and travel fears. Additional constraints include continued quarantine restrictions for Hong Kong visitors, economic challenges,...

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