SJM Resorts, Grand Lisboa Palace

Ratings agency Moody’s Investor Service has downgraded SJM Holdings corporate family rating from Ba2 to Ba1, reflecting the company’s continued delay in the execution of its refinancing plan, as well as increasing operational uncertainties relating to the Omicron outbreak in Greater China.  

“The review for downgrade reflects the fact that SJM’s refinancing risk will remain elevated until its near-term maturity is fully refinanced,” said Moody’s assistant vice president and analyst Sean Hwang in a note last week. 

“A further downgrade is possible if SJM fails to secure long-term financing to address the maturities in a timely manner.”

SJM has been looking to execute a new secured loan and revolver facilities of HK$19 billion to refinance its existing facilities which are due February 28, 2022. 

However, regulatory approvals have caused a delay in the execution of the new facilities. 

“Nevertheless, the absence of an executed refinancing arrangement at a time when the large debt maturity is forthcoming raises a degree of concern over the company’s liquidity management.”

Moody’s also said the rating action also reflects increasing operational uncertainties driven by the slow recovery of gaming in Macao and the ongoing Omicron outbreak in Great China. 

In related news, Moody’s has also lowered its 2022 forecast for Macao’s mass-market gross gaming revenue to around half of the 2019 level and expects a substantial recovery only during 2023. 

The expected slower market recovery will also lead to a slower ramp-up of SJM’s new property, Grand Lisboa Palace.

Based on these assumptions, Moody’s expects SJM’s adjusted debt/EBITDA to be around 4.0x in 2023, which positions SJM more appropriately in the Ba2 rating category, it said.