Wynn Macau earns 'BB-' rating from Fitch on Macau gaming rebound, strong financials

Fitch Ratings has assigned a first-time 'BB-' issuer default rating (IDR) to Wynn Macau, highlighting a strong rebound and improvements in the Macau gaming market.

The announcement made on Tuesday encompasses the 'BB-' IDR for Wynn Resorts  and its subsidiaries, including Wynn Macau. This rating reflects a high-quality portfolio of gaming assets, anticipated improvements in Macau's gaming market, robust results in Las Vegas, and substantial liquidity, Macau Business reported.

Fitch emphasized that the noteworthy recovery in Macau gaming revenues has been a pivotal factor in Wynn's overall credit enhancement. The agency anticipates that Macau's gaming market, considering visitation and gaming activity, will further contribute to the augmentation of credit metrics.

However, it should be noted that with a 'BB-' rating, Wynn's credit position lies as the third-highest in junk territory, implying that achieving investment-grade status may take some time. Nevertheless, the existing credit rating is supported by Wynn's increasingly positive free cash flow prospects, a substantial cash reserve of $2.8 billion, and the company's strategic reduction in exposure to underperforming businesses.

Fitch's report estimates that Macau's mass market baccarat segment, especially in the premium mass segment that aligns with Wynn's target market, has nearly fully recovered to the 2019 level.

“Mass market baccarat was 91 per cent of full year 2019 levels, although 4Q23 levels exceeded the 4Q19,” its analysts said.

The rating outlook for Wynn has been appraised as stable by Fitch, reflecting the agency's expectation that the Macau market will persist in its recovery following the easing of travel restrictions due to the pandemic, a robust Las Vegas market, and the company's strong liquidity.

Analysts noted that despite the swift growth in gaming revenues, visitation and airline capacity remain below 2019 levels. The rebound in these metrics is anticipated to serve as an additional source of revenue growth in the near term.

According to the Fitch report, Macau operations are projected to experience mid-teens revenue growth as easy comparisons in early 2024 gradually decline to more normalized levels. EBITDAR margins are expected to improve by 100-150 basis points this year and show slight improvement over the forecast horizon, the report said.