Moody’s Ratings says an upgrade of the ratings of Macau gaming operator SJM Holdings Ltd “is unlikely at present”, given the “negative outlook” that the institution has on the casino concessionaire.
The commentary was part of a Monday report in which Moody’s assigned a ‘B1’ rating to the proposed senior unsecured U.S. dollar notes to be issued by SJM International Ltd and guaranteed by SJM Holdings.
The parent has said it will use the proceeds mainly for refinancing existing indebtedness and general corporate purposes.
In September, Moody’s had affirmed the ‘Ba3’ corporate family rating (CFR) of SJM Holdings, but changed the firm’s rating outlook to ‘negative’ from ‘stable’.
In Monday’s memo, Stephanie Lau, a Moody’s Ratings vice president and senior credit officer, stated: “SJM’s Ba3 CFR reflects its long-standing presence in Macau’s gaming market and the city’s favourable long-term growth outlook.”
Ms Lau added: “At the same time, the rating captures risks from its high financial leverage and geographic concentration in Macau, where gaming revenue remains sensitive to policy shifts in both Macau and China.”
Moody’s estimates SJM Holding’s adjusted debt to earnings before interest, taxation, depreciation and amortisation (EBITDA) to have risen “to 8.3 times to 8.7 times in 2025, from 7.4 times for the 12 months ended 30 June 2025”, after “accounting for weakened” third-quarter 2025 earnings and the “debt-funded acquisition” of L’Arc Hotel.
“Subsequently, we expect the financial leverage ratio will improve visibly to about 6.0 times in 2026, driven by higher EBITDA and a modest debt reduction,” stated the rating agency.
“Higher earnings will be mainly supported by the reallocation of satellite casino tables to SJM’s self-owned properties and the newly acquired L’Arc Hotel,” the institution suggested.
It added: “Other contributing factors include continued growth in gaming revenue, further ramp-up of Grand Lisboa Palace [pictured], and normalisation of win rates.”
Moody’s said however that the “projected leverage ratio remains weak for the Ba3 rating category”.
“There are also significant risks to this assumption, given uncertainty around its organic earnings performance, customer retention and the extent of earnings generation from the satellite table reallocation,” it noted.
In Monday’s report, Moody’s said it expects SJM Holding’s liquidity “to be good”.
“Liquid sources from the proposed senior U.S. dollar unsecured bond proceeds, in addition to cash holdings – excluding restricted cash – of HKD2.1 billion [US$269.7 million] as of end-June 2025, its available revolving credit facility, will be more than sufficient to cover its cash needs and maturing debt over the next 12 to 18 months,” the institution added.
Moody’s said the ‘B1’ rating on the proposed notes was “one notch lower than SJM’s CFR because secured bank loans and subsidiary-level liabilities are a significant portion of SJM’s liability structure and have priority over the senior unsecured claims at the holding company in a default scenario”.
Despite an upgrade of SJM Holding’s ratings being unlikely at present, Moody’s said it could revise the company’s outlook to stable if the casino firm “improves its earnings, reduces debt, and maintains adequate liquidity”.
“Credit metrics indicative of this scenario includes SJM’s adjusted debt/EBITDA trending toward 5.5 times or lower on a sustained basis,” the rating agency noted.
