Melco Resorts & Entertainment, a major player in the Macau gaming market, is poised for significant financial recovery and debt reduction in the coming years. Moody’s, a renowned ratings agency, predicts that Melco will substantially increase its Adjusted EBITDA to around US$1.3 billion by 2024, up from US$900 million in 2023. This boost in cash flow will play a crucial role in reducing the company’s debt profile.
Financial Projections
Moody’s anticipates Melco Resorts & Entertainment’s adjusted debt/EBITDA ratio to improve significantly. The ratio is expected to drop from around 8.6x in 2023 to approximately 5.5x in 2024 and further to about 4.2x by 2025. This positive trend is driven by the ongoing recovery of the Macau gaming market, a key operational area for Melco.
Debt Reduction Strategy
Melco Resorts & Entertainment has taken deliberate steps to tackle its debt burden. By the end of 2022, the company’s total debt stood at US$8.7 billion. Since then, Melco has successfully paid off approximately US$1 billion of this debt. The company is committed to maintaining a focused approach on debt reduction in the short term, aligning with its financial objectives.
Liquidity Position
Moody’s analysis highlights Melco’s robust liquidity position. As of the end of 2023, Melco held US$1.3 billion in cash, complemented by strong operating cash flow. This liquidity, coupled with the proposed Senior Notes offering, is expected to further bolster the company’s financial flexibility.
Moody’s Rating
Moody’s has assigned a Ba3 rating to Melco Resorts Finance’s proposed Senior Notes. This rating reflects Melco’s established operations, high-quality assets, and the agency’s confidence in the company’s improving financial leverage over the next few years.
Market Outlook
Moody’s Vice President and Senior Credit Officer, Gloria Tsuen, emphasizes the positive outlook for Melco Resorts & Entertainment. The agency expects ongoing improvements in financial leverage during 2024-25, driven by the strong recovery of the gaming market in Macau SAR, China.
Potential Upgrades
Moody’s indicates a potential for rating upgrades if Melco demonstrates further earnings improvement, continues to reduce debt, and maintains solid liquidity. A sustained decline in the adjusted debt/EBITDA ratio to below 4.5x to 5.0x would be pivotal for potential rating upgrades.
Melco Resorts & Entertainment is on track for substantial financial recovery and debt reduction. With a strategic focus on improving earnings, reducing debt levels, and maintaining robust liquidity, Melco is poised to leverage the recovering Macau gaming market to achieve its financial goals. Moody’s positive outlook underscores the potential for further improvement in Melco’s credit ratings, reflecting a promising trajectory for the company’s financial health.