Wynn Resorts Credit Story Improving, But Still Junk-Rated by Fitch

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Posted on: January 30, 2024, 08:46h. 

Last updated on: January 31, 2024, 11:21h.

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Wynn Resorts (NASDAQ: WYNN) has an improving in installments story, but it earned a junk people of “BB-“ pinch a “stable” outlook successful caller sum by Fitch Ratings.

Wynn debtWynn and Encore Las Vegas. Fitch Ratings tagged nan usability pinch a “BB-” in installments grade. (Image: Vegas Means Business)

Factors successful favour of nan casino operator’s in installments profile, arsenic highlighted by nan ratings agency, see a compelling portfolio of land-based casino assets, ongoing betterment successful Macau — nan operator’s largest marketplace — and spot successful Las Vegas, wherever it runs its namesake casino edifice and Encore Las Vegas.

This is somewhat offset by nan company’s mean diversification, though it operates successful 2 of nan largest gaming markets successful nan world, and nan superior required to money existent and imaginable superior projects, which could impact nan gait of much meaningful in installments improvement,” according to Fitch.

Wynn’s “stable” outlook is suggestive of Fitch’s position that Macau will proceed bouncing backmost from nan 2020 done 2022 coronavirus pandemic slump, continuing upside for Wynn’s Las Vegas venues, and nan gaming company’s coagulated liquidity.

Macau And Wynn Resorts Credit Profile

In modular operating environments, Macau drives two-thirds aliases much of Wynn’s net earlier interest, taxes, depreciation, amortization, and depreciation (EBITDA) and revenue, making it 1 of nan astir China-dependent companies based successful nan U.S.

That implies immoderate level of vulnerability to China’s sluggish system and U.S./China geopolitical tensions. Still, information confirms casino activity is rebounding successful Macau, and that room remains to return to pre-pandemic gross gaming gross (GGR) levels.

Additionally, Wynn’s venues successful nan typical administrative region (SAR) — Wynn Macau and Wynn Palace — are proving adept astatine adopting to a caller operating environment that’s little limited connected VIPs and much focused connected premium wide bettors.

“Despite nan accelerated maturation successful gaming revenues, visitation and hose capacity stay beneath 2019 levels, and nan rebound successful those metrics should supply different root of further gross maturation complete nan adjacent term,” added Fitch. “Results astatine Wynn Palace has responded strongly, pinch wide marketplace revenues and spot EBITDAR margins for 3Q23 already supra 2019 levels.”

Prospects for Wynn Credit Upgrade

At “BB-“, Wynn’s in installments standing is simply nan third-highest successful junk territory, meaning it could beryllium a while earlier nan usability attains investment-grade status. However, location is support for nan existent in installments standing successful nan shape of Wynn’s progressively agleam free rate travel prospects, rate connected manus of $2.8 billion, and nan institution trimming exposure to lagging businesses.

In nan U.S., Wynn has “high-quality” assets successful Las Vegas and by measurement of Encore Boston Harbor. At nan latter, nan usability is forecast to adhd parking and different caller amenities starting this year. Those projects, which are expected to beryllium completed successful 2026, could further boost nan venue’s position arsenic 1 of nan top-performing location casinos successful nan U.S. As for shareholder rewards, Fitch sees Wynn focusing much connected its dividend and little connected stock buybacks.

“Wynn has repurchased banal successful 2023, but Fitch believes superior allocation to shareholders will attraction chiefly done nan dividend. A nominal magnitude of stock repurchases is estimated complete nan forecast sky arsenic opportunistic purchases,” concluded nan ratings agency.

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