Ratings firms mixed on LVS asset sale

Las Vegas Sands

Las Vegas Sands’ sale of its Nevada properties for $6.25 billion has elicited differing reactions from global credit ratings agencies.

Fitch Ratings has reaffirmed the casino operator’s ratings and negative outlook, but has decided that the transaction is a “slight credit negative” for the group.

Its reasoning is that Las Vegas Sands will lose a source of revenue from Las Vegas once those properties ramp up again and also marginally reduces the group’s diversification. With the sale of the assets, LVS becomes primarily an Asian operator with the majority of its properties based in Macau and one in Singapore.

The sale also “raises some uncertainty about the ultimate use of proceeds,” Fitch said, adding it would like more clarity.

“A revision to Stable would not necessarily hinge on LVS providing a more specific use of proceeds. However, a more aggressive shareholder return policy than what Fitch would consider commensurate with the operating recovery could lead to further rating pressure.”

Some analysts have suggested LVS may reinstate dividends to shareholders.

LVS has said that it is in growth mode and is looking for opportunities for expansion, which may include reinvestment in its properties in Asia, new markets, or digital possibilities. The latter is an area in which it lags its peers due to opposition from former Chairman Sheldon Adelson who died in January.

MGM Resorts has seen strong growth from its online joint venture with the U.K.’s Entain and is actively seeking further expansion, potentially through a major opposition.

Analysts have also pointed to possible land-based acquisitions in Asia Pacific. Bernstein Research in a note earlier this week pointed to Australia’s Crown Resorts as a possible target.

On the up side, Fitch says the sale provides the operator more liquidity and improves its overall leverage.

The negative outlook reflects with ongoing uncertainty due to Covid. The ratings agency is forecasting Macau’s gross gaming revenue to be 45 percent below 2019 levels in 2021, recovering to 15 percent below by 2022, with a weaker trajectory in Singapore.

However, it notes that LVS has taken action to bolster liquidity and its credit profile and therefore further downgrades are unlikely.

Moody’s has taken a more optimistic tack, saying the sale is a “modest credit positive.”

It provides “significant additional capital, further enhancing liquidity while providing flexibility to continue to reinvest in Macau and Singapore, as well as pursue additional growth opportunities and debt reduction.”

Moody’s also has a negative outlook on the company due to the continuing impact of Covid-19 on earnings.