Fitch Ratings has upgraded the Long-Term Issuer Default Ratings (IDRs) for Las Vegas Sands Corp. (LVSC), Sands China, Ltd. (SCL) and Marina Bay Sands Pte. Ltd. (MBS), collectively Las Vegas Sands (LVS) to ‘BBB-‘ from ‘BB+’.
The ratings agency has also upgraded the senior unsecured bonds and revolver at LVSC and SCL to ‘BBB-‘ from ‘BB+’/’RR4′. Fitch has affirmed MBS’ secured revolver and term loan at ‘BBB-‘. The Rating Outlook is Stable.
The rating it said reflects a strong rebound in the Macao market and outperformance in Singapore that has driven leverage metrics through Fitch’s upgrade sensitivities. Fitch believes the pace of recent growth in Macao should allow LVS to continue to remain at investment grade metrics given the company’s strong position in the premium mass market, along with positive FCF generation and strong liquidity.
LVS has a potentially heavy capital program, especially if it wins a New York City license, but Fitch believes the company is able to meet this funding without materially affecting the balance sheet. The rating also reflects potential weakness in the China economy, regulatory changes, and an increasingly competitive environment in Macao from new openings and expanded facilities.
The Stable Outlook reflects increasing visitation to and spend in Macao and Singapore. This has led to a normalisation of operations and created abundant liquidity that protects LVS from pockets of economic weakness.
Key rating drivers include the fact that the expectation of further market improvement in Macau and continued strong performance in Singapore should ensure credit metrics remain at these levels or even further improvement. Fitch believes LVS is willing to manage its balance sheet in a manner consistent with investment grade ratings, and the company has a solid track record of publicly articulating its leverage policy and adhering to prudent balance-sheet management.
The improvement in EBITDA leverage includes assumptions for the common dividend at $0.20 quarterly (estimated approximately $600 million annually), stock repurchases, and the resumption of a Sands China distribution in 2026.
Despite the rapid growth in gaming revenues, visitation and airline capacity remain below 2019 levels, and the rebound in those metrics should provide another source of further revenue growth over the near term. In addition, capital improvements, particularly at The Londoner, should further drive long-term growth for LVS.
In Singapore, LVS is realising mass gaming revenue at record levels. Overall airport monthly passenger volume and aircraft seat capacity from China is still below pre-pandemic levels but has recovered to 87% to 2019 capacity in December 2023. Overall performance at MBS increased despite a major room renovation at the complex that left a significant number of rooms out of inventory. Phase I of the room refurbishment is mostly done, and Phase II is expected to be completed through 2024 and 2025. Completion of both phases will result in fewer rooms but a higher quality product to attract more affluent customers.
LVS is projecting $950 million in spending at MBS for a refresh of the existing hotel tower to introduce an improved suite product., which is expected to be completed by the end of 2025.
In Macao, the company committed to spending a minimum of MOP30.2 billion, or USD3.75 billion, over the 10-year concession term through 2033.
LVS is also a bidder for a casino in New York. Given the uncertainty of receiving a bid and, if successful, the time frame for developing a casino, the project is not considered a key rating driver. If LVS wins the license, it would be required to meet a $500 million licensing fee. Fitch notes that LVS has a strong track record for developing large casino and entertainment projects.
Wynn Resorts Limited (BB-/Stable) has significant exposure in Macao, as well as Las Vegas and Massachusetts. Leverage is higher at Wynn while both have robust liquidity. Like LVS, Wynn has an aggressive capital spending and development program over the next few years.
LVS’ liquidity is strong with $5.1 billion of unrestricted cash, as of Dec. 31, 2023. In addition, LVS has pending liquidity from a $1.20 billion sellers note it received upon the sale of its Las Vegas properties in 2022, and LVS has approximately $4.5 billion of aggregate revolver availability. The next material maturity is the $1.75 billion LVSC senior unsecured notes due in 2024.
Fitch expects consolidated LVS to generate strong FCF over the forecast horizon despite dividend payments and capital spending projects. This could be offset by future unannounced projects (including New York) and resumption of dividends out of Sands China.
