Melco on track to accelerate de-leveraging amid stronger EBITDA: CBRE

Melco Resorts & Entertainment is expected to accelerate its de-leveraging trajectory throughout 2025, supported by EBITDA growth and strategic capital moves, according to a recent investment memo by CBRE Credit Research. 

The report highlights Melco as the most compelling de-leveraging story in Macau’s gaming sector, underscoring the company’s ongoing efforts to reduce debt across its organizational structure.

In a note released after Melco announced its 1Q25 results, CBRE points to the company’s first-quarter 2025 performance, during which both Melco and its subsidiary, Studio City, continued progress—primarily through EBITDA gains. This trend is expected to continue, with the potential for accelerated debt reduction through incremental repayments.

‘Melco continues to prioritize debt paydown as a means of de-leveraging,’ the memo states, citing not only internal cash flow improvements but also recent financial actions, such as the parent company’s April rights offering. A portion of the proceeds—between 50 percent and 60 percent—was used to repay credit facility debt at Melco International Development Ltd, the parent holding company controlled by Lawrence Ho.

CBRE notes that this rights offering, worth approximately $100 million, was backstopped by a shareholder loan agreement and came at a steep discount. This suggests urgency in managing upcoming maturities, notably the $600 million facility debt due in June 2026 at the parent HoldCo. Given the parent’s lack of standalone cash-generating assets, the report indicates a possibility that Melco could be called upon to support refinancing efforts.

Additionally, Melco’s path to deleveraging may be strengthened by the ongoing strategic review of City of Dreams Manila. Several prospective buyers have reportedly signed nondisclosure agreements and are conducting due diligence ahead of a formal bidding process. Proceeds from a potential sale could be redirected toward further debt reduction.

Despite higher bond yields relative to peers like MGM China and Wynn Macau, CBRE maintains an ‘Outperform’ rating on Melco and Studio City bonds. The firm sees Melco’s clearer de-leveraging strategy as a key reason for this positioning, especially as spreads have widened by nearly 100 basis points over the past three months—outpacing the 50–75 basis point increase observed among competitors.

Liquidity conditions remain solid, according to the report. The company has sufficient cash and revolver availability to manage the $1 billion in Melco notes and $222 million in Studio City notes maturing this year. Melco management has indicated a preference for utilizing internal liquidity levers over accessing the high-yield bond market in the near term.

Elsewhere in its portfolio, Melco’s Cyprus operations showed good topline growth, though EBITDA contribution was modest. Regional headwinds are expected to ease as summer travel picks up. Meanwhile, construction in Sri Lanka remains on schedule, with the new casino set to open in the third quarter of 2025. Financial contributions from this project are expected to begin appearing in results from August, excluding pre-opening expenses.